Street expects ₹65,000-cr revenue for RIL

Dalal Street is estimating a 15 per cent rise in sales revenue year-on-year for energy and telecom giant Reliance Industries to ₹65,000 crore for the December 2016 quarter. While benefits from a benign price environment for oil are expected to kick in, the huge investments in telecom are yet to pay off.

Axis Capital expects RIL’s adjusted net profit to hit ₹7,710 crore for the quarter, up 7 per cent from December 2015, while operating margins might see a slight dip. “The outperformance (is likely) to continue,” it said in a report. “As standalone PAT is likely to remain flat quarter-on-quarter, recovering Henry Hub gas price should support consolidated net profit. The gross refining margin is expected to be about $11 a barrel with slight bump-up in operating expenses at $2.3 a barrel.”

It also predicted that RIL, besides Tata Steel, SBI, HDFC Bank, Maruti Suzuki, and ONGC, will be the chief earnings drivers in the Q3 season for the Sensex.

Deutsche Bank’s estimate also is a 15 per cent rise in sales with net profit expected to be up 11.7 per cent to ₹8,063 crore. It also has a buy call on the stock.

HDFC Securities has given RIL a “good outlook” with a GRM expectation of $11.5/bbl (vs 10.1 q-o-q). It said refining volumes would be about 17.5 million tonnes, and petrochemical margins are expected to “remain healthy”. It has a price target of ₹1,225. The current market price is ₹1,078.

Bank of America-Merrill Lynch expects net profit to come in at ₹7,290 crore. Jefferies has given a ‘hold’ call, saying the maintenance shutdown, and lower petchem earnings may offset a strong refining quarter. “Despite a sharp improvement in Singapore complex GRM in the quarter to $6.7/bbl from $5.1/bbl in the September quarter, we expect Reliance’s earnings to be largely flattish versus the preceding quarter. Reliance’s GRM is likely to improve by a more modest $0.7/bbl to $10.8/bbl,” it said.

Motilal Oswal has given a ‘neutral’ call on the stock. “RIL trades at 9.8x FY18E adjusted earnings per share of ₹109. RIL’s new refining/petchem projects are likely to add to earnings from the second half of FY18 to FY19, but the telecom business would be a drag on profitability.”

With its latest venture, the telecom network Jio, yet to start charging customers, any gains from this sector are still awaited. JP Morgan said, “It is critical for RJio to maximise the ARPU (average revenue per user) rather than the pricing per GB of data offered… In our view, a lot would depend on how many of the current subscriber base migrates into paying subscriber base and at what level of ARPUs they come in.”

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