Reliance Q2 Results Preview: May Post Double Digit Growth In Q2 On Back Of Refining Margin Gains

Mukesh Ambani led Diversified conglomerate Reliance Industries Ltd (RIL) is all set to release its earnings for the second quarter on Friday. Four business segments of RIL that generate revenue for the company include oil-to-chemicals (O2C), oil-to-gas, retail, and Jio platforms. Reliance, India's largest company by market capitalization is likely to show robust performance across segments, except for some weakness in the petrochemicals segment.

Analysts expect Reliance to report two-digit growth in net profit on the back of growth in all areas in Q2 FY24 following a weak Q1 FY24 O2C performance. RIL's Retail EBITDA is expected to see a jump with higher foot traffic. Oil and Gas EBITDA will likely improve with increased gas output, while Jio's EBITDA is also likely to increase with the addition of new subscribers.

The copany's oil to chemicals (O2C) and exploration and production (E&P) segments are expected to report strong growth for the quarter under review.

For Reliance's O2C segment, a robust refining segment is likely to offset the feeble petchem segment. This is because petrochemical prices slumped 1% sequentially and 13% on a year-on-year(YoY) basis in the second quarter of 2023-24.

According to a Forbes report, as of October 04, 2023, Reliance is India's biggest company in terms of market capitalization. One day ahead of the company's Q2 results, RIL shares are spotted trading 0.54% lower at Rs 2245.85 per share at 10:03 am IST. At this price, the Indian conglomerate has a market capitalization of Rs 15.87 crore.

In the April-June quarter, the oil-to-telecom conglomerate experienced a 10.8% drop in its net profit at Rs 16,011 crore, while revenue from operations was down 4.7% to Rs 2,31,132 crore. The oil-to-chemicals (O2C) arm's revenue fell 17.7% to Rs 1,33,031 crore on a reduction in crude oil prices.

However, RIL saw positive growth in its Reliance Retail business. The gross revenue of the retail arm surged by 19% year-on-year (YoY), reaching Rs 69,948 crore, compared to Rs 58,554 crore in the June quarter last year.

Kotak Institutional Equities expect RIL's standalone EBITDA to improve 7% QoQ, reflecting resilient GRM and improvement in petchem margins, higher E&P profitability on slightly higher gas production.

RIL's EBITDA for R-Jio is estimated to increase 2% qoq, largely driven by 5.7 mn overall net adds, qoq stable blended ARPU at Rs 178 as subscriber mix improvements and rising contribution from FTTH are offset by lower days in the quarter (90 versus 92 in 3Q). The firm expects Reliance Retail's revenue/EBITDA to increase by ~2% qoq, driven by increased store footprint and the benefits of operating leverage.

Meanwhile, with continued subscriber losses at Vodafone Idea, R-Jio is expected to see a rise in market share.

Systematix Institutional Research

According to Systematix Institutional Research, RIL's EBITDA is estimated to grow at 5% QoQ/28% YoY led by marginal gains across segments. Upstream business can flourish by 20% QoQ due to higher crude prices while O2C business can gain 7% QoQ due to higher GRM, inventory gains partially offset by lower petchem margin, and shutdowns. Retail and Jio Digital Services businesses are expected to post modest growth of 5%/3% sequentially led by higher footfall and a 2% increase in ARPU. The brokerage firm has kept RIL in the hold category at the moment.