Analysts expect 17% growth in RIL net profit

Reliance Industries (RIL), the country's most valued company in terms of market capitalisation, is expected to post 13-17 per cent rise in its net profit for the quarter ended September, over the year-ago period, said analysts. The company will announce its results on Saturday.

However, the sequential performance will be far more muted due to lower gas production from the Krishna Godavari D6 block and pressure on petrochemicals margins. Analysts expected only 1-2 per cent rise in net profit over the previous quarter.

The average gas production is estimated between 44.5 and 46.2 million standard cubic metres of gas per day (mscmd), against 48.6 mscmd for the June-September quarter. Sector analysts expect the company to register an improvement in gross refining margins (GRMs), turning every barrel of crude oil into fuel, anywhere between $10-11 per barrel and benefit from a weak rupee.

RIL's GRM in the second quarter of 2010-11 stood at $7.9 per barrel. Refining forms over 40 per cent of RIL's overall business with petrochemicals and oil & gas forming 35 per cent and 15 per cent, respectively.

Anil Sharma and Ravikumar Adukia from Nomura Financial Advisory and Securities in their quarterly earning preview report said: “Despite an improvement in regional refining margins, we expect RIL to report muted growth (up to one per cent quarter-on-quarter).”

The Singapore GRM was $8.5 per barrel in the first quarter of FY12 and $4.2 per barrel in the September quarter. Singapore GRM in 2Q FY12 is at the highest level in 17 quarters, according to a report from the Bank of America Merrill Lynch.

“Lower KGD6 production would be more than offset by higher refining (US$10.5 per barrel) and higher other income resulting in a 2 per cent quarter on quarter increase in RIL net profit,” said CLSA.

Ahead of its financial result, RIL was trading higher by 2.36 per cent at Rs 866.80 on the Bombay Stock Exchange.

Analysts said profit from the petrochemical business could take a hit of anywhere between 7-15 per cent.

“Last quarter too, GRMs came to RIL’s rescue. RIL faces a huge challenge with regard to increasing gas output from its flagship KG D6 block. The global economic downturn may also impact its petrochemical margins. Also, we don't know how far RIL's partial shutdown of its SEZ refinery last month (for maintenance) will impact its quarterly earnings,” said a Mumbai-based analyst.