Mumbai: Better performance in the petrochemical (petchem) business may lift Reliance Industries Ltd’s results in the June quarter despite lower refining margins and a stronger rupee, analysts said.
RIL, which operates the world’s largest refining and petrochemicals complex at Jamnagar (Gujarat), will report its earnings on Thursday.
According to a Bloomberg poll of six brokers, RIL is expected to post consolidated net sales of Rs76,326 crore and net profit of Rs7,764.5 crore for the three months ended 30 June. A year ago, the figures were Rs71,451 crore and Rs7,113 crore respectively.
A Bloomberg poll of six brokers estimates its stand-alone net sales at Rs63,084.70 crore and a poll of five brokers expects the stand-alone net profit to come in at Rs8,119.60 crore. “RIL may report a tenth consecutive quarter of stand-alone earnings increase. However, with the sharp strengthening of the rupee, we think sequential stand-alone earnings would largely be flat," Nomura Research said in a report dated 11 July.
RIL’s stand-alone profit for the quarter ended 31 March was Rs8,151 crore.
Analysts expect RIL to post a gross refining margin (GRM) between $10.5 and $11.2 per barrel against $11.5 per barrel a year ago. GRM is what a refiner earns by turning a barrel of crude oil into refined products. In the June quarter, the benchmark Singapore GRMs averaged flat at $6.4 per barrel.
“We expect most domestic refiners to report sequentially weaker refining margins. In addition, inventory losses resulting from sharp decline in crude/product prices would dent refining margins in Q1FY18," said Antique Stock broking Ltd in a report dated 7 July.
Motilal Oswal Securities expects RIL to post an inventory loss of $1 a barrel.
During the June quarter, crude oil prices fell to an average of $50.8 per barrel from $54.6 in the March quarter. The rupee appreciated against the dollar, averaging Rs64.5 a dollar against Rs67 a dollar in Q4FY17.
Over the last few quarters, RIL’s refineries have enjoyed a premium of $4-5 per barrel to Singapore GRMs. “We expect GRMs at $11.2 per barrel, a $4.8 per barrel premium over Singapore benchmark," said Edelweiss Securities Ltd in a note dated 5 July.
However, higher volumes, better margins and a new para-xylene plant (PX4) are expected to help RIL’s petchem business.
“With benefits for new capacities coming on stream, we think petchem earnings should increase sequentially," said Phillip Capital in a note dated 6 July.
Losses in the exploration and production front may widen for RIL, with production from its KG D6 block expected to have declined to 7 million metric standard cubic metres per day.
On Wednesday, RIL’s scrip ended at Rs1,533.50, up 0.89% on the BSE, while the benchmark Sensex closed at 31,955.35 points, up 0.77%.
The company is expected to make fresh announcements on its telecom venture Jio at its annual general meeting scheduled on Friday. Analysts said they expect RIL to give a low-down on monetization of its telecom business, in addition to launching new plans and mobile devices.