RIL Q2 earnings: Will Jio hit Reliance show? Here is what analysts say

When Reliance Industries Ltd (RIL), India's most valuable company by market capitalisation (market cap), reports its earnings for the July-September quarter after market hours today, all eyes will be on the group’s telecom venture Reliance Jio Infocomm. Though the Mukesh Ambani-controlled company is likely to report a healthy growth in profit after tax (PAT) on a standalone basis, for an 11th straight quarter, thanks to record growth in refining and petrochemical businesses, Jio could impact the group’s consolidated performance, analysts say. 

Earlier in the June quarter, the company’s consolidated net profit rose 28% (12.7% QoQ) to Rs 9,108 crore. Gross refining margin for the quarter grew by 3.5% to 9-year high of $11.9 a barrel against $11.50 a barrel on a sequential basis.

Here's what brokerages expect from RIL's Q2 numbers:

Nomura

September quarter will likely be the 11th consecutive quarter of stand-alone QoQ profit growth. We expect refining premium to the SG complex to moderate ($4/bbl vs $5.5/bbl in 1Q); still, both refining and petrochemical (petchem) should report record EBITs. But the focus will be on Reliance Jio’s first reported quarterly numbers. Though it is difficult to forecast, we think Jio could report positive EBITDA in its first quarter itself.

Kotak Institutional Equities 

We expect RIL to report 14% QoQ increase in standalone EBITDA to Rs 13260 crore and 13% QoQ increase in net income to Rs 9,220 crore (EPS of Rs 14.2), driven by expected increase in refining margins to $13.2/bbl and increase in petchem volumes. We model consolidated net income of Rs 6,470 crore (EPS of Rs 11) assuming Rs 2,530 crore of loss from Reliance Jio. However, we would be watchful on ‘accounting’ of revenues and costs, which may depend on apportionment and capitalisation. Incremental update on ramp-up schedule for downstream projects will be crucial.

Prabhudas Lilladher

RIL’s earnings are likely to be robust at Rs 8,450 crore led by higher refining margins; factored in $13.0/bbl ($11.9/bbl in Q1). Also, refining thruput is likely to be higher. We have factored in 17.8 MTPA (Q1FY18 17.3MTPA). However, petrochemicals and polyester spreads are likely to come off sequentially.

ICICI Securities

We estimate RIL’s Q2FY18 standalone EPS to be up 13% YoY driven mainly by rise in refining and petrochemical EBIT. Q2FY18 consolidated EPS, excluding telecom subsidiary RJio, is estimated to be up 19% YoY. We estimate RIL’s Q2FY18 GRM at $12.8/bbl, up 24% YoY.

Elara Capital

We expect GRM of domestic refiners (BPCL, HPCL, IOCL, MRPL and RIL) would improve by $3-9/bbl YoY to $9-13/bbl on 1) refineries outages globally, 2) strong global oil demand growth of 2.3mmbpd YoY during previous quarter and 3) strong crude inventory gains as crude prices increased ~USD10/bbl during Q2FY18. RIL would also benefit from 11% YoY growth in petchem EBIT due to commissioning of new plants.