Q3FY24 earnings preview: Consumer business to boost RIL's earnings

Analysts estimate strong performance in consumer businesses to be offset by a decline in O2C earnings

Reliance Industries’ (RIL’s) consumer business is expected to lead earnings growth in the Q3FY24 performance, according to analysts. While the energy business is expected to show sequential weakness, the consumer business, especially retail, is estimated to show strong growth. The Oil-to-telecom conglomerate will announce its Q3FY24 financial results on Friday.

In a Bloomberg poll, nine analysts estimated consolidated revenue for the company at Rs  2.521 trillion for Q3FY24 and seven analysts estimated an adjusted net income of Rs 18,497 crore for the same period. RIL’s September-23 quarter earnings had received a boost from the improved performance of its energy business, comprising its oil-to-chemicals (O2C), and oil and gas segments. Analysts expect this trend to reverse, as the O2C business suffers sequential weakness.

Analysts with ICICI Securities noted that RIL is likely to see a sharp decline in its OTC segment earnings with an estimated $ 1.6/barrel sequential decline in gross refining margins (GRMs), along with lower throughput due to the shutdown of its refinery (down by Rs 1.1 million tonne sequentially) and muted petrochemical spreads (due to lower realisations). RIL's Q3FY24 segment-wise performance on a year-on-year (Y-o-Y) basis is expected to show a similar trend.

Those with Jefferies estimate a two per cent Y-o-Y dip in the O2C business Ebitda, a 10 per cent Y-o-Y rise for the telecom business, and above 30 per cent Y-o-Y growth in Ebitda for the retail and the oil and gas business. Ebitda is earnings before interest, taxation, depreciation and amortisation. Overall Ebitda for the company, according to the brokerage, is expected to rise by 13 per cent Y-o-Y.

The consumer business, on the other hand, is expected to increase its share in the company’s overall Ebitda. Analysts with UBS Securities noted, “The performance of Digital (Jio) and Retail should remain strong (Ebitda +5 per cent sequentially), leading to a 49 per cent share (46 per cent in Q2FY24) of these businesses in segment Ebitda.” Overall, UBS Securities said, they expect Reliance to report Q3FY24 Ebitda up 16 per cent Y-o-Y and consolidated profit after tax (PAT) at 6 per cent Y-o-Y, but down 4 per cent sequentially.

Analysts with JP Morgan noted RIL’s retail segment would continue to report strong growth with an estimated 29 per cent Y-o-Y rise in revenue and 36 per cent Y-o-Y growth in Ebitda aided by festivities in the third quarter and margins expansion.

On key monitorables, clarity on the Rs 75,000 crore earlier announced investments in the new energy business, growth in retail store additions, and any pricing action in telecom will be sought, noted analysts with Motilal Oswal.