Mumbai: Reliance Industries Ltd (RIL) is expected to report record revenues in its petrochemical and retail divisions, backed by the highest subscriber additions in its telecom arm Jio, later on Friday when it announces its March quarter earnings.
A Bloomberg poll of several analysts expects RIL to report a net profit of Rs9,347 crore, on the back of revenues worth Rs1.16 trillion for the quarter ended 31 March. The poll shows a 12.6% and 0.8% drop in revenue and net profit sequentially. However, on an annual basis, the revenue and net profit are up 36.8% and 16.2%, respectively.
The RIL stock was trading at Rs998 at 9.20 am, up 2.32 % from the previous day. However, the company’s shares shed close to 4% during Q4, FY18.
RIL’s $30 billion telecom venture Reliance Jio Infocomm Ltd reported a profit of Rs504 crore ($78.97 million) in Q3, FY18 (September-December 2017) from a loss of Rs271 crore in the previous quarter. On the back of its promotions, Jio subscribers crossed the 175 million mark at the end of the March quarter.
Morgan Stanley said in a 8 April research report that Jio is expected to report a quarter-on-quarter decline in ARPU (average revenue per user) due to tariff cuts of early 2018. “We estimate Jio to add about 30 million subscribers in 4Q taking total subscriber base to 190 million and ARPU to decline about 20% q-o-q to Rs124. This could potentially lead to 5% and 20% sequential revenue and EBITDA decline thus eroding the profitability for the quarter," the report added.
A Jefferies research report dated 4 April said that presuming no drastic changes to opex and capital charges in RIL’s telecom business, ARPU is expected to fall on the January tariff cuts to Rs140 but a higher subscriber number, estimated at 190 million at the end of 31 March, is likely to drive RIL’s EBITDA by 7% and net profit by 22% higher (q-o-q) to Rs6.2 billion (Rs 620 crore).
RIL’s gross refining margin—the difference between the cost of crude oil and the average selling price of refined products—is expected to drop marginally to $11.3 a barrel, but still outstrip the regional benchmark Singapore Complex which managed $7 a barrel in the same period. A report by Jefferies expects refining EBIT to fall 5% this quarter to Rs6,000 crore levels while the retail business’s EBIT will increase 135% to Rs600 crore.
An analyst report from Motilal Oswal forecasts net profit of Rs9,450 crore for the quarter, backed mostly by strong petrochemical performance. “The petrochemicals segment is expected to do better due to healthy deltas and strong volume growth." Earnings from the petchem division are expected to surge to Rs6,600 crore, a 92% rise year-on-year, largely attributed to the commissioning of the off-gas cracker and petcoke gasification units at the refinery in Jamnagar.
Shares of RIL rose 2.87% in early trade, buoyed by record earnings expectations. However, analysts have sounded a word of caution. A sharp rise in benchmark crude oil prices and the rupee depreciating against the US dollar doesn’t bode well for oil marketing companies; oil refining, marketing and petrochemicals account for the bulk of RIL’s revenues.
According to a Motilal Oswal research report on the telecom sector, dated 2 April, all existing private sector telecom players are expected to continue pricing aggressively to attract the marooned subscribers from now defunct operators like Tata Teleservices, Telenor, RCom and Aircel, which may hamper Jio’s subscriber addition numbers in coming quarter.
A Jefferies report added that even if Jio maintains its growth pace in terms of subscriber base, its revenue market share may rise more slowly on lower average revenues per user. The firm has maintained an underperform call on the stock.