High expectations from Reliance Industries' September earnings

Expectations are high from the oil-to-telecom conglomerate Reliance Industries ahead of the release of its July-September quarterly earnings post market-hours today.

The m-cap of the Mukesh Ambani-led RIL tops the market capitalisation list of BSE, with capsize amounting to Rs 8,85,040 crore, at the closing price of Rs 1,396.15, on Thursday. Today the market capitalisation of Reliance Industries has crossed Rs 9 lakh crore mark. 

Financial services firm Anand Rathi, in its 2019 Diwali Picks report, listed the stock as its top pick, saying, "Retail business of the firm has grown phenomenally, registering a 7-fold increase in revenue and a 14-fold increase in profit in 6 years term." The brokerage house added, "With the investment cycle having peaked, company's Return On Investment (ROI) trajectory is likely to improve going forward."

Company's telecom operator arm Jio is expected to witness a further decline in its average revenue, as a chunk of its subscribers is low-paying customers, equity market analysts said. However, positive customer growth trend can keep the financials in a stronger position compared to Bharti Airtel and Vodafone Idea, who have continued posting losses.

According to the data by TRAI released today, Reliance Jio added 84.4 lakh users in August against 85.4 lakh subscribers in July, while Vodafone Idea saw an increase in the loss of users at 49 lakh in August against 33.9 lakh subscribers in July month. Airtel, on the other hand, has lost 5.6 lakhs users in August month against  25.8 lakh in July month, indicating less number of users migrating to other operators.

As per September earnings estimates by HDFC Securities, the index heavyweight is expected to reap benefits of lower taxation. Higher margins in refining business are also expected, that is likely to compensate for the decline in petrochemicals margins.

"Company's revenues may grow 2.5% year-on-year to Rs 1.47 lakh cr, while its EBITDA margin may expand 120 bps to 14.8%. Additionally, lower interest outgo and the tax rate would boost profitability, with PAT expected to increase 14% year-on-year to Rs 10,820 cr," the report stated.

Company's Gross Refining Margin (GRM) is expected to grow 5% quarter-on-quarter to US$ 8.5/bbl, the HDFC report added.

Telecom arm Jio and retail businesses are estimated to continue to deliver steady growth. Reliance Jio may report 9% quarter-on-quarter revenue growth to Rs 12,150 crore. Profit After Tax (PAT) may increase 20% quarter-on-quarter to Rs 1,077 cr.

On the downside, the company may report a 3% quarter-on-quarter decline in average revenue per user (ARPU) to Rs 119.

Gross Refining Margins, Petrochemical margins, subscribers' figure to telecom and broadband segment and Future CAPEX are among the key things to watch out today in the company's financial statements, as per HDFC report.

By Rupa Burman Roy

 Share Market Live: Sensex rises 150 points, Nifty above 11,620 level, YES Bank gains 9%

Rupee vs Dollar: Rupee falls to 71.20 per USD amid increased demand for dollar