Q2 Results Preview: RIL’s Profit May Rise The Most In Nearly Four Years
The company’s profit may rise the most in nearly four years on the back of India’s largest corporate tax rate cut in two decades.
Reliance Industries Ltd.’s quarterly profit is expected to rise the most in nearly four years on the back of India’s largest corporate tax cut in two decades.
Profit of India’s largest company by market value may rise by about 7 percent over the previous quarter in the three months through September—the most in the last 15 quarters, according to data compiled by BloombergQuint.
The oil-to-telecom conglomerate’s operating profit is also expected to rise for the first time in five quarters, led by a recovery in refining margins and lower feedstock prices, calculations by BloombergQuint show. Some of these benefits, however, will be offset by lower refining volumes and weakness in petrochemical margins.
Singapore gross refining margins, the Asian benchmark, rose 86 percent over the preceding three months to average around $6.5 per barrel in the quarter ended September—the highest in six quarters—due to the rise in petrol and fuel-oil product spreads. A higher gross refining margin means the company would be able earn more for converting every barrel of crude oil into fuel.
However, RIL’s premium to the benchmark is expected to be the lowest in 18 quarters. That’s on the back of maintenance shutdowns during the quarter and lower production of petrol and fuel-oil. RIL produces more diesel.
Growth at Reliance Jio Infocomm Ltd.—the telecom arm of billionaire Mukesh Ambani-controlled group—will continue, largely aided by strong subscriber additions. Analysts expect Reliance Jio to add close to 2.4 crore subscribers in the quarter ended September. However, average revenue per user is expected to fall yet again as the operator adds more JioPhone subscribers who come at lower rentals, lured by cashbacks on digital recharges.
Growth in RIL’s retail segment is likely to moderate due to seasonal weaknesses.
Analysts would be keen on updates on RIL’s deal with Saudi Arabian Oil Co., under which the Mumbai-headquartered company plans to sell a fifth of its petrochemicals and refining business to the oil giant. That, along with signs of decline in capital expenditure intensity, should increase investor confidence.
