Shares of Reliance Industries Ltd (RIL) have risen more than 7% since it announced better-than-expected June quarter earnings in July. In comparison, the Nifty 50 index has moved up 0.4% during this time.

What’s more, with refining margins showing considerable strength so far this quarter, the company could well be on course to report another good quarter of earnings.

Singapore complex refining margins are at yearly highs of ~$10.5 a barrel, with September quarter margins so far ($7.9 a barrel) averaging 20% higher, wrote analysts from Morgan Stanley Research in a report on Monday. RIL’s gross refining margin for the June quarter stood at $11.9 a barrel, registering a premium of $5.5 a barrel over Singapore margins. Analysts expect the strong refining margin environment to help the company report a robust performance in its refining business in the September quarter.

Refining margins got a boost in the current quarter owing to the supply disruption in the US gulf coast refineries due to the wrath unleashed by Hurricane Harvey. At the peak of the Hurricane Harvey impact, 24% of US refining capacity (almost 4.5 million barrels of oil per day) was shut down, pointed out a report from Deutsche Bank on 5 September.

Chemical margins of key products are also up on a sequential basis, say analysts. According to Morgan Stanley, every 10% rise in refining and chemical margins pushes up RIL earnings by 8-12%. Refining and petrochemicals businesses contribute a lion’s share to the company’s operating profits. Therefore, the better margin environment augurs well for it.

Having said that, refining margins are expected to taper a bit from the current highs once the situation in the US starts to normalize and refineries get started.

Meanwhile, according to reports, the Telecom Regulatory Authority of India is considering a complete phase-out of interconnection usage charges (IUC). Kotak Institutional Equities expects savings of nearly Rs7,000-7,500 crore for RIL’s telecom venture— Reliance Jio Infocomm Ltd— in case IUC is abolished. Jio could use the savings to further subsidize its offerings and increase its subscriber base.

This would be a positive for RIL, shares of which have appreciated as much as 24.6% so far this fiscal year, compared to the 8% rise in the Nifty 50 index.

However, the sharp outperformance in the RIL stock may limit meaningful appreciation from here. Currently, one shares trade at 18 times estimated earnings for this fiscal year, which isn’t cheap.

Even as the outlook on the core refining and chemical business is robust right now, news flow on the telecom segment will be critical for the stock in the coming days. Investors should keep their ears open for the signals from telecom.