Sunday, October 14, 2012

Reliance Industries may report rise in profits after 3 quarters

Reliance Industries will report earnings for the July to September quarter after market hours on Monday. Analysts expect Reliance Industries, which is India's most valuable firm by market capitalisation, to post a rise in quarterly profit after three consecutive quarters of profit dip. Also see: Major milestones of an oil giant

According to a brokers' poll conducted by NDTV, net profit is seen to jump over 21 per cent sequentially at Rs. 5,424 crore from Rs. 4,473 crore, mainly on account of sharp gains in refining margins. The 5 per cent depreciation in the rupee in the September quarter is likely to aid earnings further. Net sales are expected to rise 2.7 per cent quarter-on-quarter at Rs. 94,377 crore against Rs. 91,875 crore.

Reliance Industries' year-on-year performance is likely to be muted though. Net profit is seen to decline nearly 5 per cent at Rs. 5,424 crore against Rs. 5,703 crore while sales are expected to rise 20 per cent at Rs. 94,377 crore against Rs. 78,569 crore.

Reliance Industries is India's biggest conglomerate in terms of market capitalisation with interests ranging from oil and gas to retail. Here's how key segments are likely to perform.

Refining: It is the biggest of Reliance Industries' business, accounting for two-thirds of the company’s net sales and 40 per cent of the company’s profit before interest and tax (PBIT). Reliance Industries is likely to report a strong sequential jump in gross refining margin (GRM) from $7.6 per barrel in the June quarter to $9-10 per barrel in the September quarter. GRM is the difference between the price of petroleum products and crude oil. GRM gains are likely to be led by middle distillates like kerosene and diesel. On an annual basis, GRMs are likely to be flat.

Petrochemical: It is the second biggest business accounting for over a quarter of the net sales and one third of the profit before interest and tax. However, Reliance Industries' profitability is under pressure from this segment and the trend is likely to continue led by lower product margins.

Oil and gas: Output at Reliance's flagship D6 block, India's largest offshore gas field, is projected to fall to 29 million standard cubic metres a day (mscmd) from 32 mscmd in the June quarter. That's nearly half of the 60 mscmd it was producing in 2010.

New businesses: Investors would be looking for any announcement regarding the upcoming 2G spectrum auction in November. Representatives of RIL subsidiary Infotel Broadband have been attended meetings organised by Department of Telecommunications on proposed spectrum auction, fuelling speculation of RIL's participation in the bidding process.

Reliance said it held nearly Rs. 71,000 crore in cash reserves at the end of June. The company has seen its cash hoard multiply in the last two years, resulting in a disproportionate increase in profits from treasury operations.

Shares in the company have gained over 14 per cent in the three months since July 16. In contrast, the BSE Sensex has gained 9 per cent over the same period. Brokerage major Morgan Stanley had downgraded Reliance Industries to "underweight" from "equal weight" last month citing sharp gains.

The stock traded 0.7 per cent higher at Rs. 824.50 in a weak market today.