All eyes on RIL results, analysts see profit going up 17-20%

Riding on a weaker rupee and an improvement in petrochemical margins, Reliance Industries Ltd (RIL) is expected to post better earnings for the first quarter of the current financial year, according to analysts.

When compared on a year-on-year basis, it could be a double-digit growth for RIL, given its low base last year. The Mukesh Ambani-led company will announce its first quarter results on Friday.

RIL is estimated to post a 17-20 per cent year-on-year rise in profits. However, the growth rate would be lower if compared sequentially. Analysts expect RIL to post profit in the range of Rs 5,240-5,280 crore for the June quarter. The company had reported a net profit of Rs 4,473 crore for the June 2012 quarter. Its profit for the March quarter stood at Rs 5,589 crore.

“Expect a sequentially weak, but 18 per cent year-on-year growth. A sharp refining margin decline is the key reason for quarter-on-quarter decline, but sharp currency weakness benefits RIL, and offsets some impact,” said Nomura in its quarterly earnings preview report.

Although benchmark Singapore gross refining margins (GRMs) were down 24 per cent quarter-on-quarter, analysts expect RIL’s GRMs to be around $8.5 a barrel, increase by 12 per cent year-on-year, but down 16 per cent sequentially.

 

“RIL is expected to report GRMs of $8.5 a barrel, lower than $10.1 a barrel in Q4, on weaker gasoline and diesel spreads during the quarter. Naphtha spreads were also lower due to weak demand from the petrochemicals sector,” Religare said in its quarterly earnings preview.

A weak rupee and strong petrochemical cracks, would support profitability.

"We expect the profits of petrochemicals segment to expand (19% QoQ in EBIT) driven by expansion in polymer spreads and weak rupee. As depicted by RIL’s product prices, PVC cracks were up 29% and PE cracks were up 6% QoQ," added ICICI Securities.

On the oil and gas business front however, earnings could decline 13% against the last quarter.  Production from KG-D6 continues to decline, averaging at 15 million standard cubic metres (MSCMD) during the quarter, down 4 MSCMD against the previous quarter.  

RIL scrip was trading at Rs 917.34, up 0.35% on the Bombay Stock Exchange (BSE).