Reliance Industries Limited (RIL) Results in Q3FY19: RJio remains top focus - Will it throw any surprise?

The share price of Reliance Industries (RIL) was trading on a positive note, however, not with much enthusiasm considering the company is set to announce its December 2018 (Q3FY19) quarter result anytime today. At around 1148 hours, the RIL shares were trading at Rs 1,143.95 per piece gradually above 0.87% on BSE. However, so far the stock has managed to touch an intraday high of Rs 1,147.8 per piece which results in overall 1.21% rise on the index. However, it is not just investors but even experts feel a muted Q3FY19 result awaits in RIL which is the second largest company in terms of market share after TCS. What would be interesting to watch is RIL's telecom arm Reliance Jio's performance in the quarter and Mukesh Ambani's quote and the outlook ahead. 

Let's understand what is there in store for RIL's Q3FY19.

Vineeta Sharma, Head of Research at Narnolia Financial Advisors said, "Revenue is expected to increase by 25% on YoY basis on the back of robust performance by petrochemical and retail segment. However, PAT is expected is expected to fall by 6% YoY in Q3 FY19e due to lower refining margins and inventory losses in reefing segment due to a sharp decline in crude oil prices."

In case of refining margin, Sharma adds, "expected to come under pressure and company likely is expected to report GRM of 8 USD/bbl in the last quarter. However, refining margins of the company are expected to improve from Q4 FY19 led by lower crude oil prices."

Further, in regards to petrochemical segment, Sharm explained that it is expected perform better in terms of volume growth, on the back of ramp-up of pet coke gasification projects in Jamnagar, however, realization and margins are expected to come slightly under pressure due to fall in crude oil prices.

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Also Dhananjay Sinha, Head, Institutional Research, Economist and Strategist at Emkay stated that Reliance would witness $8.7/bbl GRM down qoq, lower petchem earnings with inventory loss, 25% ETR.

Similarly, Prabhudas Liladher said, Reliance Industries will see muted earnings growth due to weak refining earnings even as strong petrochemicals earnings and rupee depreciation will support earnings."

Meanwhile, analysts at Edelweiss Securities explained that higher oil prices (+10.9% YoY), depreciating INR (+11.5% YoY), higher petchem volumes (+16.3% YoY) will drive robust revenue growth. Lower GRM (-24.7% YoY) and lower polymer cracks will offset this resulting in lower.

Edelweiss also said, "EBITDA growth at 8.8% YoY. Higher interest costs(+92.0% YoY) will drive lower PAT growth."

However, analysts were quite optimistic about RIL's retail business and telecom arm. 

Sharma said, " Reliance Retail is aggressively expanding its footprint by adding around 400 new stores every year. We believe that this segment will continue to outperform in coming quarters and expects revenue in this to grow by around 67% YoY to Rs.115,849 Cr in FY19e."

Talking about RJio, Sharma said, "growth momentum is expected to continue for next couple of quarters but stiff competition restricts ARPU of Jio to around Rs 132. Jio is now rolling out JioGiga Fiber in 1,100 cities in India and is targeting 5 Cr JioGiga Homes in the first phase."

As on September 2018, Jio stands with a subscriber base of 250 million. 

Emkay also reiterated saying, "Retail, Jio expected to report better earnings qoq, but part of consolidated numbers."

During Q2FY19, RIL  its highest ever quarterly net profit of Rs 9,516 crore, a 17.4 per cent rise year-on-year, for the July-September period today due to strong growth in its petrochemicals segment. It's net profit stood at Rs 8,109 crore in the second quarter of the previous fiscal. The revenue rose 54.5 per cent to Rs 156,291 crore during the said quarter. 

In the same quarter,  RJio had its own fair share of good news to divulge for the July-September period. The company posted a standalone net profit of Rs 681 in Q2FY19 vs Rs 612 crore in Q1FY19. RJio logged a massive revenue of Rs 10,942 crore which was higher by 51.7% per cent.