RIL Q3 Preview | Revenue set to grow 21%, powered by Jio and retail

RIL’s net profit is expected to grow 4.4 percent to Rs 16,366 crore from a year earlier and sequentially by 19.7 percent, according to the average of estimates of brokerages polled by Moneycontrol

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Diversified conglomerate and the biggest Nifty heavyweight Reliance Industries is expected to report double-digit growth in consolidated revenue and EBITDA (earnings before interest, taxes, depreciation and amortisation) for the October-December quarter, according to a Moneycontrol poll.

Net profit is expected to grow 4.4 percent to Rs 16,366 crore from a year earlier and sequentially by 19.7 percent, according to the average of estimates of brokerages polled by Moneycontrol. Revenue is expected to rise 21 percent YoY to Rs 2.23 lakh crore.

The company will report its December quarter earnings on January 20, after market hours.

While most brokerages expect RIL to report broad-based growth across segments, the retail and Jio verticals’ performances will be watched with particular interest.

“We estimate RIL’s Q3 FY23 consolidated EBITDA to grow 10 percent sequentially, driven by a recovery for the O2C (oil-to-chemical) segment on a low base, strong uptick for upstream and sustained growth across consumer-facing businesses,” analysts at Nomura noted.

Energy business

In the last quarter, the central government’s special additional excise duty on export of refined products had cost the company Rs 4,039 crore. This had resulted in flat profit growth year on year. However, the windfall tax has been revised lower several times till then, and thus, O2C earnings will recover sequentially.

Tax on export of diesel now stands at Rs 5 per litre and the same on overseas shipments of ATF (aviation turbine fuel) now stands at Rs 3.5 a litre.

“This segment’s earnings would recover QoQ led by lower taxes aiding higher refining margins, though partly offset by lower petchem spreads,” added UBS. Jefferies has pegged this segment’s EBITDA at Rs 12,893 crore.

Elevated middle distillate cracks, higher E&P (exploration & production) profitability on gas price hikes and currency depreciation will also aid earnings recovery, analysts at Kotak Institutional Equities (KIE) noted.

Telecom and retail

Analysts expect telecom arm Jio’s ARPU (average revenue per user) to improve to Rs 179 from Rs 177 last quarter. A strong net subscriber addition of 7 million is expected to boost Jio’s EBITDA by 3-4 percent sequentially. Brokerages have forecast an EBITDA of Rs 12,635 crore in this segment.

Residual benefits of the operator’s lower Spectrum Usage Charge (SUC) will also boost its earnings, added KIE.

Reliance Retail is also expected to continue its strong growth show with an improvement in footfalls during the festive season and the benefits of operating leverage. The launch of its FMCG (fast moving consumer goods) brand Independence and the acquisition of Metro Cash and Carry were the two major announcements on the retail front last quarter.

Investors are keenly awaiting clarity on how the retail business is poised for future growth, with analysts expecting 25-30 percent year-on-year growth in the segment’s EBITDA.

The Street will also be watching for announcements on the new energy business and the progress of Jio’s 5G rollout.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

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