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RIL’s Q3 earnings to be led by consumer biz, refining margins likely to remain under pressure

RIL’s Q3 earnings to be led by consumer biz,  refining margins likely to remain under pressure
  • Diesel cracks went down to $20.3/bbl in Q3 as opposed to $26.5/bbl in Q2.
  • E&P business to see robust growth in Q3 on account of rise in KGD6 output.
  • Retail and telecom businesses are expected to see steady earnings due to expansion and higher ARPU.
  • The street is eyeing FY25 earnings as it hopes net debt can come down with monetization of investments.
Reliance Industries is expected to see a subdued third quarter, with a possible sequential fall in net profit and a mid-single digit growth in revenues. Weakness in refining business will be partially offset by steady growth in telecom and retail business, brokerages say.

Its oils-to-chemicals business where it gets a lion’s share of revenues from, is under pressure due to moderation in diesel cracks, narrowing of Russian discounted crude and more. Diesel cracks, which is the refining margin of the product, went down to $20.3 per barrel in the third quarter as opposed to $26.5 per barrel in the second quarter.

JM Financial also sees a fall in EBITDA (earnings before interest tax depreciation and amortization) due a sharp double digit fall in the operating profit of oils to chemicals business.

Lower refining throughput due to maintenance shut-down and continued weakness in petchem margin, will add to its woes this quarter.

E&P, consumer biz to shine

All other sectors within and outside the oil business are expected to support earnings. “This (fall in O2C EBIDTA) will be partly supported by robust growth in exploration and production (E&P earnings and steady growth in digital and retail businesses,” said J M Financial. The expansion in retail as well as possible margin improvement in telecom business along with rising subscriber numbers are the silver lining in the cloud.

Its exploration business is all set to see double digit EBIDTA growth due to lower operational expenses as well as an increase in KG D6 gas output. This business is also expected to see an impact of a cut in ceiling price for gas.

“We have estimated 1% rise in average revenue per user (ARPU to Rs183.5 in jio telecom business while a strong 400 new retail outlets along with 8% EBITDA margin at Retail division in Q3FY24 vs 7.7% in Q3FY23

RIL’s Q3FY24 earnings forecast

J M Financial



-1.2% QoQ 5.5% YoY

5.1% QoQ 12% YoY


-1.8% QoQ 14.1% YoY

-2.4% QoQ 13.4% YoY

Net profit

-4.4% QoQ 5.3% YoY

-7.7% QoQ 1.5% YoY

Source: Brokerage reports

Street eyes FY23 earnings, rising share of digital biz

After subdued price movement in most of 2023, RIL stock price has moved up by 10% in the last one month. The rally is parallel to benchmark indices hitting lifetime highs, but analysts see fundamental changes this year (both calendar and fiscal).

For one, the company which has become debt-heavy due to high investments should be able to see them coming to fruition this calendar year, swelling in net asset value (NAV).

“We expect 2024 to be an eventful year for RIL as the past two years of investments move into the monetization phase. We think investment cycles will be shorter than in the past two decades, with limited impact on balance sheet leverage. The key to watch will be the startup of revenues from the new energy vertical, which we believe remains most underappreciated in NAV,” said Morgan Stanley.

Growth in sub-verticals of retail like fashion and grocery, 5G monetization will be carefully watched by the street. The telecom business is also expected to see the much-delayed tariff hikes in the coming fiscal year, even as its O2C business growth might remain subdued to slowdown in global demand and rise in capacity additions.

“We expect capex to decline in Jio and Retail in FY25 helping improve free cash flow (FCF) abating concerns on rise in net debt. We forecast 13% Ebitda growth in FY25 with Jio contributing around two-third share on the back of a tariff hike,” said Jefferies.


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