Reliance Industries, India's biggest company by market capitalisation, will most likely report a second consecutive quarter of lower profits on Friday.
Shares of the company traded lower on the bourses ahead of announcement of Q4 results. At 12.55 pm, the stock traded 1.2% lower at Rs 733 on the BSE, while the Sensex was down 0.34% at 17,444.
Reliance was the biggest drag on the Sensex, adding nearly 20 index points on the downside. The stock has been a huge underperformer over longer time frames too. Over the last three months, it has fallen 4.5% against a similar rise in the Sensex. (Also read: Time to return cash to shareholders?)
Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services gave a sell call on Reliance saying the stock may fall to 700-720 by the end of the day.
"The only thing that is cushioning the downside is the buyback on the counter," Shah told NDTV Profit today.
Here are five reasons why RIL stocks are depressed.
1) Earnings: The company is likely to report a decline in profit despite growth in sales. Sales are likely to rise 16% to Rs 84,350 crore on an annual basis (year-on-year) but profit after tax (PAT) is expected to fall over by over 21% to Rs 4,227 crore (YoY). On a sequential basis too, both sales (-0.94%) and earnings (-4.8%) are likely to fall. Earnings before interest, tax, depreciation and amortization (Ebitda) margins are likely to fall 30% to Rs 6,900 crore (YoY).
2) Refining margins: Gross refining margins, the difference between total value of petroleum products and price of crude, are likely to fall by over 29% (YoY) to $6.5 per barrel. Higher the GRMs, higher the profit yields. The refining business accounts for two-thirds of the company’s net sales and 40% of the company’s profit before interest and tax (PBIT).
"For the first time in this quarter, RIL's GRM realisation will be lower than Singapore GRM," Deven Choksey, MD of KR Choksey Securities told NDTV Profit today. The Singapore crude is considered a benchmark for complex refineries.
Choksey says heavy dependence on diesel and jet fuel, which saw the maximum impact on margins, have hit the company. Petrol and LPG, which saw the least impact on margins, is a lesser component of RIL's sales portfolio. New refineries in Asia have also built pressure on Reliance, Choksey added.
3) Volumes: Refinery volume is expected flat at 16.2 MTPA due to closure of units for maintenance.
4) Petrochemical margin is estimated to be lower led by sharp decline in margins and flat volumes. Petrochemicals are the second biggest business accounting for 27% of the net sales and 34.4% of the profit before interest and tax. "Margins are likely to fall in areas of polyester, naphtha and propylene," Choksey said.
5) KG-D6 volumes are seen down 11% at 36 million metric standard cubic meter per day (QoQ): Reliance Industries' largest gas fields in its flagging KG-D6 block have hit an all-time low production of about 28 million standard cubic meters per day. While Reliance holds 60% interest in KG-D6, UK's BP Plc holds 30% and Niko Resources of Canada the remaining 10%.
Reliance Industries, India's biggest company by market capitalisation, will most likely report a second consecutive quarter of lower profits on Friday.
Shares of the company traded lower on the bourses ahead of announcement of Q4 results. At 12.55 pm, the stock traded 1.2% lower at Rs 733 on the BSE, while the Sensex was down 0.34% at 17,444.
Reliance was the biggest drag on the Sensex, adding nearly 20 index points on the downside. The stock has been a huge underperformer over longer time frames too. Over the last three months, it has fallen 4.5% against a similar rise in the Sensex. (Also read: Time to return cash to shareholders?)
Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services gave a sell call on Reliance saying the stock may fall to 700-720 by the end of the day.
"The only thing that is cushioning the downside is the buyback on the counter," Shah told NDTV Profit today.
Here are five reasons why RIL stocks are depressed.
1) Earnings: The company is likely to report a decline in profit despite growth in sales. Sales are likely to rise 16% to Rs 84,350 crore on an annual basis (year-on-year) but profit after tax (PAT) is expected to fall over by over 21% to Rs 4,227 crore (YoY). On a sequential basis too, both sales (-0.94%) and earnings (-4.8%) are likely to fall. Earnings before interest, tax, depreciation and amortization (Ebitda) margins are likely to fall 30% to Rs 6,900 crore (YoY).
2) Refining margins: Gross refining margins, the difference between total value of petroleum products and price of crude, are likely to fall by over 29% (YoY) to $6.5 per barrel. Higher the GRMs, higher the profit yields. The refining business accounts for two-thirds of the company’s net sales and 40% of the company’s profit before interest and tax (PBIT).
"For the first time in this quarter, RIL's GRM realisation will be lower than Singapore GRM," Deven Choksey, MD of KR Choksey Securities told NDTV Profit today. The Singapore crude is considered a benchmark for complex refineries.
Choksey says heavy dependence on diesel and jet fuel, which saw the maximum impact on margins, have hit the company. Petrol and LPG, which saw the least impact on margins, is a lesser component of RIL's sales portfolio. New refineries in Asia have also built pressure on Reliance, Choksey added.
3) Volumes: Refinery volume is expected flat at 16.2 MTPA due to closure of units for maintenance.
4) Petrochemical margin is estimated to be lower led by sharp decline in margins and flat volumes. Petrochemicals are the second biggest business accounting for 27% of the net sales and 34.4% of the profit before interest and tax. "Margins are likely to fall in areas of polyester, naphtha and propylene," Choksey said.
5) KG-D6 volumes are seen down 11% at 36 million metric standard cubic meter per day (QoQ): Reliance Industries' largest gas fields in its flagging KG-D6 block have hit an all-time low production of about 28 million standard cubic meters per day. While Reliance holds 60% interest in KG-D6, UK's BP Plc holds 30% and Niko Resources of Canada the remaining 10%.
Reliance Industries, India's biggest company by market capitalisation, will most likely report a second consecutive quarter of lower profits on Friday.
Shares of the company traded lower on the bourses ahead of announcement of Q4 results. At 12.55 pm, the stock traded 1.2% lower at Rs 733 on the BSE, while the Sensex was down 0.34% at 17,444.
Reliance was the biggest drag on the Sensex, adding nearly 20 index points on the downside. The stock has been a huge underperformer over longer time frames too. Over the last three months, it has fallen 4.5% against a similar rise in the Sensex. (Also read: Time to return cash to shareholders?)
Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services gave a sell call on Reliance saying the stock may fall to 700-720 by the end of the day.
"The only thing that is cushioning the downside is the buyback on the counter," Shah told NDTV Profit today.
Here are five reasons why RIL stocks are depressed.
1) Earnings: The company is likely to report a decline in profit despite growth in sales. Sales are likely to rise 16% to Rs 84,350 crore on an annual basis (year-on-year) but profit after tax (PAT) is expected to fall over by over 21% to Rs 4,227 crore (YoY). On a sequential basis too, both sales (-0.94%) and earnings (-4.8%) are likely to fall. Earnings before interest, tax, depreciation and amortization (Ebitda) margins are likely to fall 30% to Rs 6,900 crore (YoY).
2) Refining margins: Gross refining margins, the difference between total value of petroleum products and price of crude, are likely to fall by over 29% (YoY) to $6.5 per barrel. Higher the GRMs, higher the profit yields. The refining business accounts for two-thirds of the company’s net sales and 40% of the company’s profit before interest and tax (PBIT).
"For the first time in this quarter, RIL's GRM realisation will be lower than Singapore GRM," Deven Choksey, MD of KR Choksey Securities told NDTV Profit today. The Singapore crude is considered a benchmark for complex refineries.
Choksey says heavy dependence on diesel and jet fuel, which saw the maximum impact on margins, have hit the company. Petrol and LPG, which saw the least impact on margins, is a lesser component of RIL's sales portfolio. New refineries in Asia have also built pressure on Reliance, Choksey added.
3) Volumes: Refinery volume is expected flat at 16.2 MTPA due to closure of units for maintenance.
4) Petrochemical margin is estimated to be lower led by sharp decline in margins and flat volumes. Petrochemicals are the second biggest business accounting for 27% of the net sales and 34.4% of the profit before interest and tax. "Margins are likely to fall in areas of polyester, naphtha and propylene," Choksey said.
5) KG-D6 volumes are seen down 11% at 36 million metric standard cubic meter per day (QoQ): Reliance Industries' largest gas fields in its flagging KG-D6 block have hit an all-time low production of about 28 million standard cubic meters per day. While Reliance holds 60% interest in KG-D6, UK's BP Plc holds 30% and Niko Resources of Canada the remaining 10%.
Sign Up with Google
RECOMMENDED FOR YOU
POPULAR