Reliance Industries Q3 Preview: Profit, Revenue Likely To Rise Sequentially, EBITDA Could Decline

Reliance Industries (RIL), India's largest company in terms of market capitalization is set to announce its December quarter (Q3FY24) results on Friday (January 19). Market experts believe that the diversified conglomerate is expected to report a decent set of numbers for the quarter under review, thanks to higher utilization of refineries sustaining their robust operating efficiency.

On the back of strong performance in the telecom and retail segments, RIL's consolidated net profit may grow 4% sequentially to Rs 18,080 crore for the quarter ended December 2023, according to the consensus of analysts' estimates tracked by Bloomberg. Notably, the oil-to-chemicals segment saw a stressful third quarter.

The Oil-to-telecom conglomerate reported a 29.7% year-on-year (YoY) growth in its September quarter consolidated net profit at Rs 19,878 crore. The company's EBITDA grew 30.2% YoY to Rs 44,867 crore while the EBITDA margin jumped 390 bps YoY to 17.5%.

Investors will be closely watching the earnings report of the diversified conglomerate which operates in various sectors, including energy, petrochemicals, retail, and telecommunications.

The consolidated revenue of Reliance may rise 8.5% sequentially to Rs 2.54 lakh crore on higher sales in the retail, telecommunications, and oil and gas segments. However, the company's operating profit-EBITDA is projected to fall marginally or 1.3% sequentially to Rs 40,413 crore.

The operating margin is seen to be lower by 176 bpa at 15.9% on lower gross refining margins.

According to Kotak Institutional Equities, the company's consolidated EBITDA is expected to decline around 2% QoQ (+13% YoY). "With weak refining/petrochemicals, flat E&P (lower HPHT price offset by lower costs), we expect standalone Ebitda to decline 9% QoQ (up 16% YoY)," it said.

Kotak expects an 8% YoY increase in RIL's net sales and a 2.7% YoY increase in adjusted PAT for Q3FY24.

Oil-To-Chemicals

The company's oil-to-chemicals segment is expected to report a lower operating profit number due to weak refining margins and flat-to-marginally higher petrochemical margins.

The O2C EBITDA will be affected by weak gross refining margins that fell 43% sequentially and 14% year-on-year. In a report, JP Morgan said, "As per our calculations, Reliance's GRM in Q2 FY24 was at $9.9/barrel, which is down to $7.9 in Q3 FY24. Petrochemical margins are expected to be at $193/tonne (blended basis) in Q3 FY24, up from $191 in Q2 FY24."

Reliance Jio:

RJio is likely to report robust numbers due to higher subscriber additions and better average revenue per user. "We expect (RJio) Ebitda to rise around 4% sequentially (14% year-on-year), driven by around 12 million net subscriber adds and a marginal ARPU uptick to around Rs 183 versus Rs 182 QoQ," said analysts at Kotak Institutional Equities.

Retail:

Reliance is likely to report satisfactory numbers in the retail segment's revenue and operating numbers on account of higher footfalls, as the third quarter was a season of festivities. The numbers will be supported by strong operational leverage as well. "As has been the case in the last couple of quarters, retail would continue to report strong growth (revenue/Ebitda growth estimated at 29%/36% YoY, aided by festivities in Q3 and margins expansion," said JPMorgan in a report.

Kotak expects EBITDA for R-Jio to increase nearly 3.5% QoQ, driven by nearly 12 million overall net subscriber adds (versus nearly 11 million QoQ) and modest increase in blended ARPU (average revenue per user) to Rs183 (versus Rs 182 QoQ) on rising FTTH (Fiber to the Home) contribution and retail to increase nearly 6% QoQ, driven by increased store footprint, increased footfalls and benefits of operating leverage.