Reliance Industries Ltd (RIL) has started fiscal year 2018 (FY18) on a strong footing. Sure, consolidated profit was boosted by a one-time item of Rs1,087 crore for the June quarter. However, pre-tax and exceptional items earnings have increased about 9% year-on-year to Rs10,522 crore, not a bad performance.

The good thing is that the company managed to improve its gross refining margin (GRM) on a sequential basis to $11.9 a barrel, in sharp contrast to expectations of a quarter-on-quarter decline. Favourable crude oil sourcing and robust risk management made for a higher GRM.

Consolidated refining Ebit (earnings before interest and tax) increased 13.4% compared to the same period last year. But the June quarter refining Ebit includes the exceptional item representing profit from divestment of stake in Gulf Africa Petroleum Corp. In contrast, stand-alone refining Ebit has declined and Ebit margin fell 262 basis points, at a faster pace than the consolidated Ebit margin decline of about 50 basis points. A basis point is one-hundredth of a percentage point.

The company’s Jamnagar refineries processed 17.3 million tonnes of crude oil during the June quarter, which analysts say isn’t too impressive and may have offset some of the GRM gain affecting the segment’s stand-alone Ebit margin to an extent.

The petrochemicals business, which was expected to perform well, hasn’t disappointed. Petchem Ebit increased considerably by 43.7% year-on-year to Rs4,031 crore. This was helped by favourable product spreads and volume growth. June quarter petchem Ebit margin at 15.8% was at an all-time high level, according to RIL.

The upshot: the company’s consolidated earnings per share came in at Rs30.76 for the June quarter, much higher than the mean estimate of Rs25 of six analysts’ estimates on Bloomberg.

RIL’s debt outstanding increased 2% sequentially to a little more than Rs2 trillion at the end of June while cash and cash equivalents declined to Rs72,107 crore compared to Rs77,226 crore at the end of FY17.

But investors won’t complain. They are already sitting on a 42% appreciation since RIL announced in February that it will start charging its customers in the telecom business, Reliance Jio Infocomm Ltd, starting this fiscal year. In fact, the accompanying chart shows the stupendous rise in the one-year forward price-to-earnings estimates in the past year, clearly reflecting the irrational exuberance in the stock. Currently, one RIL share trades at 16 times estimated earnings for FY18, according to Bloomberg data.

That’s not cheap. Nevertheless, as long as there is liquidity in the broader markets, the RIL stock is likely to remain buoyant. But announcements in the telecom business are critical. The annual general meeting, to be held on Friday, is expected to shed more light on the telecom plans. Announcements about the 4G feature phone, if any, will be a key thing to watch out for.

Singapore benchmark GRMs have averaged higher so far this quarter compared to the June quarter. But even as the core oil businesses are expected to remain stable, any positive surprises in telecom profitability will fetch brownie points.