Reliance Industries (RIL) is expected to post a modest growth in its revenue and net profit in Q1FY25 on a year-on-year basis. But its Ebitda (earnings before interest, taxes, depreciation and amortisation) may fall on a sequential basis, according to analysts.
Global brokerages such as Goldman Sachs, Morgan Stanley and others expect the second quarter to be better for the company due to improvement in refining margins and business metrics in the telecom and retail businesses.
As per a Bloomberg poll, 13 analysts estimated RIL to post a revenue of `2.3 trillion in Q1, 11.8% higher than the corresponding quarter of the previous fiscal. Six analysts expect the company to post a net profit of `17,655 crore, about 10.3 % higher than Q1FY24 but down 6.8% on a quarterly basis. Fourteen analysts estimated an Ebitda of `39,790 crore, 15.4% down on a q-o-q basis.
Analysts at Morgan Stanley said: “Volatility between months and quarters in refining margins has been a norm over the past two years, yet on a full-year basis, they have been sustained above mid-cycle levels. We do not see that changing.”
The Morgan Stanley analysts expect a y-o-y decline in consolidated earnings as global fuel demand moderated in the last quarter after a great start to 2024 and new refineries started up. “We see trends reversing and still view RIL as a play on the monetisation 4.0 cycle,” they added.
Chemicals and retail should show sequential improvement in key parameters after a tough March quarter, they said. Overall, Morgan Stanley estimate a 1% y-o-y and 16% q-o-q decline in profitability for Q1 as refining margins decline by about a third.
Goldman Sachs analysts expect RIL’s core Q1 Ebitda to decline 5% sequentially, mainly driven by the pullback in refining margins. However, they expect the market focus to shift towards Q2 where they see a refining margins recovery, telecom tariff hike (effective July 3), and strong same-store sales in retail driving the sequential Ebitda growth.
Telecom returns have already started to inflect with the recent ARPU (average revenue per user) hike, while capex has been declining with the pan-India 5G rollout already completed and lower-than-expected spectrum capex, Goldman Sachs said.
“We expect retail returns to also start inflecting in FY25, driven by same-store sales growth but see capex declining amid frontloading over FY21-24 through aggressive store expansion and investments in omni-channel capabilities,” it said.
Kotak Institutional Equities expect RIL’s consolidated Ebitda to decline by ~8% q-o-q driven by weak O2C (oil to chemicals) performance and muted growth in digital services and organised retail.
Kotak expects RIL’s standalone Ebitda to decline ~15% q-o-q on sequentially weaker refining margins. In E&P, it expect ~4% q-o-q decline in Ebitda on marginally lower realisation and production.
“We bake in 4% y-o-y rise in RIL’s consolidated Ebitda (-7% q-o-q) on a strong performance across verticals except O2C. We anticipate O2C Ebitda to fall 11% y-o-y on weak refining (GRMs -16% y-o-y/-53% q-o-q) and weak petchem O&G Ebitda to rise 30% y-o-y on 33% y-o-y production rise,” Nuvama analysts said.
They expect retail Ebitda to grow 17% y-o-y on 14% y-o-y rise in retail area. They estimate Jio Ebitda to rise 11% y-o-y /3% q-o-q on high subscriber base (8% y-o-y /flat q-o-q) and strong ARPU (2% y-o-y/1% q-o-q).