After a tepid April-June period, brokerages expect better quarters ahead for Reliance Industries (RIL) on the back of a pick-up in the oil-to-chemicals (O2C) division and continued growth in Jio and retail segments.
A weak performance by the O2C division led to low single-digit growth in the conglomerate’s Q1 net profit.
On Monday, RIL’s shares closed 3.49% down at `3,001.10 on the BSE.
“Structurally, we are bullish on the refining business, given globally capacity growth (International Energy Agency estimates of 2023-30: ~3.3million barrels per dollar) will lag oil demand growth (~1.0-1.2million barrel per dollar p.a.),” Motilal Oswal Research said.
Global oil demand for CY24 is likely to be at ~103mb/d (up 1mb/d y-o-y). Gasoil cracks are anticipated to remain firm due to the strength in jet fuel demand and the limited availability of heavy crude, it said.
In O2C, it sees refining and petchem segments picking up from the current levels, as net capacity additions for both segments are tapering off on a yea-on-year basis. Moreover, FY25 would witness the full benefit of the ramped-up volumes at the MJ Field, it said.
It has maintained its capex estimates at `1.2 trillion each year for FY25/26, modelling `39,200 crore /`35,600 crore in telecom, `65,000 crore each year in the standalone business, `11,000 crore/`10,700 crore in retail, and the rest in others, considering RIL’s investments in the new-age greener businesses.
The management highlighted that global oil demand growth is expected to normalise at 1 mb/d in 2024 after a strong growth of 2.1mb/d in 2023, BofA Securities said, adding that fuel markets could tighten in the near term due to the US driving season demand (~0.3 mb/d) and stronger recovery in international aviation (~0.5 mb/d), possibility of active hurricane season in the US (impacting 1 mb/d capacity) likely reinstatement of ban on Russian gasoline exports to prevent domestic shortage, it said.
New energy business would likely be back on radar as RIL targets to get its 5,000-acre green energy complex live in H2CY24, it said.
Given the persistent weakness in GRM, Axis Capital cut RIL’s FY25E GRM to $10/bbl (from $ 11.5/bbl), but it has kept FY26/27E unchanged.
The telecom operations will benefit from Jio’s recent tariff hikes in the second quarter. The telco’s revenue and operating profit were in line with Street expectations, and since the average revenue per user (Arpu) was flat at `182 for the fourth straight quarter, the tariff hikes will pull it up, Citi said.
The brokerage said the focus will now shift to RIL’s annual general meeting next month, “with investors likely keen to hear updates on the listing of Jio and/or retail + timelines on new energy project commencements”.