RIL Q2 results preview, 3 things to watch, share price targets & more

Oil-to-telecom major Reliance Industries Ltd (RIL) is likely to report 25-28 per cent year-on-year (YoY) jump in net profit for the September quarter on a single digit de-growth in sales. Ebitda margin is seen falling on a sequential basis but would rise in excess of 400 basis points YoY, analysts said. In terms of segments, Reliance Jio is seen reporting a marginal rise in sequential average revenue per user (ARPU). The O2C Ebitda is seen improving due to a likely strong gross refining margin of about $12.5 per barrel, led by a surge in diesel cracks. It would though be partly offset moderation in Russian crude discount, lower refining throughput due to maintenance shut down and further weakness in petchem margin, analysts said. The retail segment may also do well, sequentially, on rising store count and jump in footfalls.

Investors would be keenly watching any clarity on Rs 75,000 crore announcement in the new energy business, growth in retail store additions and any pricing action in telecom segment.

Emkay Global expects RIL to report 27.7 per cent YoY surge in consolidated profit after tax at Rs 17,435.60 crore compared with Rs 13,656 crore in the corresponding quarter last year. Net sales is seen falling 2.2 per cent YoY to Rs 2,24,918.70 crore against Rs 2,30,055 crore YoY. Ebitda margin is seen at 18 per cent, down from 18.4 per cent in June quarter but up 438 basis points from 13.6 per cent in the year-ago quarter.

"O2C Ebitda is seen rising 4 per cent sequentially to Rs 15,950 crore;

Upstream Ebitda is seen up 27 per cent QoQ to Rs 5110 crore; retail EBitda is seen rising 5 per cent QoQ; Jio ARPU to rise 1 per cent QoQ, 9.5 million subscriber additions in Q2FY24 likely," Emkay said.

JM Financial pegs PAT at Rs 17,173 crore, up 25.8 per cent YoY. Sales are seen falling 2.9 per cent to Rs 2,23,474 crore. Margin is seen at 17.9 per cent. Sharekhan pegs profit at Rs 17,128 crore, up 25.4 per cent YoY. It sees sales at Rs 2,32,904 crore, down 9.8 per cent YoY.

"We estimate refining throughput of 17 mmtpa. Petchem profitability will decline QoQ, however refining margins are likely to improve amid rise in benchmark GRMs.  We expect Jio to show steady performance (3.4 per cent QoQ revenue growth and 1.9 per cent QoQ ARPU hike), while retail segment profitability should be resilient," Prabhudas Lilladher said.

On segments, Kotak Institutional Equities said Ebitda for Reliance Jio may rise 4 per cent QoQ, driven by 10 million overall net subscriber additions. It sees blended ARPU at Rs 183 against Rs 181 in June quarter on continued subscriber mix improvement, rising FTTH contribution, and higher days in the September quarter. It sees retail segment to see sequential growth, driven by increased store footprint, and benefits of operating leverage.

"We expect RIL’s standalone Ebitda to improve 9 per cent QoQ as increase in KG basin gas production and likely sequential improvement in GRMs would be partly offset by QoQ weaker petchem spreads. We expect consolidated Ebitda to improve by 6 per cent QoQ on better standalone performance and steady growth in digital services and organised retail," it said.

Share price targets

India's most-valued stock is a consensus buy with 27 out of 34 analysts tracking the stock recommending either 'Strong Buy' or 'Buy' on the stock, with an average price target of Rs 2,790, as per data publicly available with Trendlyne. The average share price target suggests a 25 per cent potential upside for the stock.

In its earnings preview, Sharekhan said it prefer RIL in the oil & gas segment, as it firmly believes that it is a compelling long-term investment bet, given strong prospects across its businesses and potential value unlocking from retail, digital services, and financial services portfolio would create long-term value for shareholders.

JM Financial also, in its earnings preview, maintained 'Buy' call on RIL as it believed net debt concerns are overdone, and also because RIL has

industry leading capabilities across businesses to drive robust 14-15 per cent EPS CAGR over the next 3-5 years.

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