RIL shares edge higher ahead of Q2; what to expect from the conglomerate

Billionaire Mukesh Ambani-led Reliance Industries (RIL) shares edged higher in early trade on Monday ahead of its September quarter earnings report slated to be released today. The oil-to-telecom conglomerate is expected to post muted earnings, impacted by weakness in the refining and petrochem businesses. The subdued performance in core oil-to-chemicals (O2C) business is likely to be partly offset by robust growth in consumer-facing businesses such as retail and telecom.

Ahead of Q2, RIL shares opened higher at ₹2,761.70, up 0.7% against the previous closing price of ₹2,742.20 on the BSE. Paring most of early gains, the country’s most valued stock was trading 0.28% higher at ₹2,750 at the time of reporting, with a market capitalisation of ₹18.6 lakh crore. Meanwhile, the BSE benchmark Sensex and NSE Nifty were up by 0.6%, led by Tech Mahindra, HDFC Bank, L&T, Kotak Mahindra Bank, and IndusInd Bank, rising in the range of 1-2%.

The share price of RIL touched a 52-week high of ₹3,217.90 on July 8, 2024, and a 52-week low of ₹2,221.05 on October 26, 2023. The stock has underperformed Sensex and oil and gas sector, delivering a return of nearly 19% in the last one year as compared to 23% rise in Sensex and 62% growth in the oil index. On the year-to-date basis, the most valued stock gained over 6% versus 12.6% and 31.5% rise in Sensex and oil and gas index, respectively. In the past three months, the counter has seen a correction of over 13%, while it lost 6% in the past six months.

Investors are eagerly awaiting RIL’s fiscal second quarter earnings report, which according to brokerages, is expected to be subdued for the second consecutive term.

Domestic brokerage JM Financial expects RIL’s EBITDA to grow 2.5% QoQ to ₹39,700 crore as the sharp telecom tariff hike is likely to partly offset weakness in O2C segment and muted growth in the retail segment.

Jio is expected to post EBITDA growth of 9.4% QoQ to ₹16,400 crore on 7% QoQ rise in average revenue per user (ARPU) to ₹194, led by tariff hike and aided by upgrades and one more day during the quarter. On the other hand, Retail EBITDA is likely to grow flat by 0.6% QoQ to ₹5,700 crore due to ongoing store rationalisation and impact of heavy monsoon.

The O2C segment is likely to post 3.9% QoQ decline in EBITDA to ₹12,600 crore due to lower refining & petchem margins. It is assumed that the gross refining margins (GRM) is expected to decline to $7.2 per barrel (vs. implied GRM of $ 7.7/bbl in Q1 FY25) due to lower diesel cracks while refining throughput could rise 1.6% QoQ to 16.3mmt. Adding to it, petchem margin is expected to decline QoQ due to largely flattish gas output and price.

For the first quarter ended June 30, 2024, RIL saw its net profit falling by 5.5% year-on-year to ₹15,138 crore as compared with ₹16,011 crore in the year-ago period. Revenue from operations rose 12% to ₹236,217 crore in Q1 FY25 as against ₹210,831 crore in the corresponding quarter last year. EBITDA increased by 2% year-on-year to ₹ 42,748 crore. 

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