RIL Gains 1% Lead on First Quarter Earnings Today; shares slide 5.5% so far in FY23

Overview of Reliance Industries (RIL) first quarter results: Reliance Industries shares rose more than 1% to 2,517 rupees apiece on the BSE ahead of the company’s April-June (Q1FY23) quarterly earnings later today. As of 9:20 a.m., the shares traded 0.99% higher at Rs 2,512, against a 0.5% gain in the S&P BSE Sensex.

So far in July, RIL shares have underperformed the market falling 4% on exchanges, compared to a 4.5% rise in the BSE 30-pack index. Additionally, so far in the current financial year (FY23), shares of the Mukesh Ambani-led company have performed in line with the frontline index. The two lost 5.4% each during the period.

Analysts expect Reliance Industries to report a solid set of FY23 first-quarter numbers, driven by strong oil earnings. According to a Bloomberg poll of analysts, the company is expected to post a consolidated net profit of Rs 21,615 crore on net sales of Rs 2.25 trillion. Earnings before interest, tax, depreciation and amortization (Ebitda) is expected to reach Rs 38,474 crore.

Compared to a year ago, revenue will increase by 56%, while Ebitda and profit after tax (net profit) will increase by almost 40% and 76%, respectively, based on estimates. of the Bloomberg consensus for the first quarter.

“We expect RIL’s Q1FY23 EBITDA to jump 33% quarter-on-quarter (QoQ) to Rss 41,800 crore, driven by a sharp increase in refining margin (GRM) to 22 per barrel; this will be helped in part by 3.4% QoQ growth in digital Ebitda and 9.0% QoQ growth in retail Ebitda,” JM Financial analysts said in an overview report of the results.

Petroleum to Chemicals (O2C) EBITDA, the brokerage said, will likely rise by 63% QoQ to Rs 23,200 crore due to high refining margin amid spike in gasoline cracks and diesel at $40-50/barrel due to supply side concerns. However, petchem margins may remain weak due to weak polyester margins due to Chinese lockdowns.

Additionally, Digital Ebitda could reach Rs 11,600 crore due to increase in ARPU (average revenue per user) to Rs 174 (from Rs 168 in Q4FY22); net subscribers are expected to increase by 4.5 million sequentially (compared to net subscribers decline of 11 million/9 million/11 million in Q4FY22/Q3FY22/Q2FY22 due to low ARPU inactive subscriber cleanup). Retail Ebitda is pegged at Rs 4,100 crore.

Refining is part of RIL’s Petroleum-Chemicals (O2C) vertical, contributing nearly 60% of revenue and nearly 50% of EBITDA. Apart from refining, petrochemicals and fuel retailing are also part of the O2C business. Retail trade and telecommunications, for their part, represent 34% of turnover and nearly 45% of Ebitda.

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According to Mayuresh Joshi, head of equity research at William O’Neil India, investors will closely watch management’s assessment of gross refining margin (GRM) amid falling crude oil prices. Singapore GRMs went from $30 a barrel to around $4 a barrel in a matter of weeks. Historically, RIL has enjoyed a premium of $ per barrel over Singapore GRMs.

“However, with retail and telecommunications now accounting for over 50% of EBITDA, the demand environment, digital onboarding and other initiatives in the space will grow in importance. and investment plans for green energy will be followed,” he said.

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