Reliance Industries Ltd.'s first-quarter profit is expected to fall, weighed down by the performance of its oil-to-chemicals business even as retail and telecom remain stable, according to BofA Securities.
The Mukesh Ambani-controlled company's profit is expected to fall 10% year-and-year and 16% over the previous quarter in the three months ended June, the brokerage said in a July 5 note.
Revenue during the period under review is expected to drop 4% in sequential terms and 7% over the corresponding period of the previous fiscal. Ebitda is expected to drop 1% sequentially, but rise 1% in year-on-year.
Earnings Outlook
The O2C earnings before interest and tax is expected to slip 6.1% quarter-on-quarter, mainly on weaker margins in the refinery business, offsetting benefits from cheaper Russian crude, the brokerage said.
The petrochemical EBIT is largely expected to be sequentially flattish in the recently concluded quarter, given the limited pricing power due to ample supply and insufficient demand, the BofA note read. Oil and gas EBIT will be largely stable, with a 1.6% sequential increase in revenue during the period under review, it said.
RIL's muted revenue and Ebitda, however, will be partially offset by steady growth in retail and telecom arms, it said.
Telecom revenue is likely to rise 1.6% sequentially in the three months through June 30, BofA said. Jio is expected to report net subscriber addition of 7 million compared to 6.4 million in the previous quarter. But average revenue per user is likely to be "largely flattish", it said.
The momentum for the conglomerate's retail business is likely to continue, growing 22% year-on-year against 19% in the previous quarter.
Focus On AGM
Going into the earnings report for the first quarter of the current fiscal, the focus is likely to be more on the upcoming annual general meeting in August, BofA said. Reliance has made key announcements on value-unlocking catalysts and future growth plans in its past AGMs, BofA said.
BofA expects similar announcements this year, especially around Jio Financial Services, clean energy and digital business. Reliance is planning to demerge and list its financial services business.
RIL's stock has historically outperformed going into the AGM on most instances, the brokerage said.
Shares of the company opened higher and were up 1.7% at 9:50 a.m. compared with a 0.04% increase in the benchmark S&P BSE Sensex.
BofA Securities retained its 'buy' rating for Reliance Industries with a price target of Rs 2,775, implying a potential upside of 6.8%.
Of the 38 analysts tracking the stock, 33 maintain a 'buy', three suggest a 'hold' and two have a 'sell' rating, according to Bloomberg data. The average of 12-month analyst price targets implies an upside of 8.2%.
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