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Reliance Industries Limited (RIL), led by Mukesh Ambani, is anticipated to report subdued earnings for the second quarter, primarily impacted by weakness in the oil-to-chemicals (O2C) segment. The company is scheduled to announce its results on October 14th. Based on the average estimate of six brokerages, the net profit for the quarter is expected to experience a decline of up to 10% year-on-year. Simultaneously, net sales are projected to drop by a marginal 0.6% year-on-year, as per the estimate.
The operating performance of the oil-to-telecom conglomerate continues to be affected, with an anticipated 7% year-on-year dip in consolidated EBITDA, primarily attributed to the O2C segment's underperformance. Analysts foresee O2C EBITDA falling by up to 27% year-on-year and 10% quarter-on-quarter due to weakness in both refining and petrochemical sectors.
Despite the subdued performance in the O2C business, analysts expect a positive showing from the consumer businesses and ONG (Oil & Gas) segments. While retail is likely to benefit from increased footfall, the rationalization of stores and the impact of heavy monsoon may influence earnings. The segment's EBITDA is projected to rise by up to 6% year-on-year. Simultaneously, Jio Platforms is expected to experience a robust quarter, driven by the recent tariff hike, upgrades, and an additional day of operation during the quarter.
Several brokerages have provided their individual insights and expectations for RIL's Q2 results. Motilal Oswal anticipates a flat year-on-year consolidated EBITDA at Rs 39,700 crore and a standalone EBITDA of Rs 14,100 crore (down 26% YoY). JM Financial expects production meant for sale to remain flat year-on-year at 17.5 mmt. Key areas of focus include further clarity on the Rs 75,000 crore announcements in the new energy business, growth in retail store additions, and any pricing actions in the telecom sector.
Nuvama projects a 6% YoY decline in RIL's consolidated EBITDA (flat QoQ) due to weakness in the O2C segment. They attribute this to a 62% YoY drop in benchmark Singapore GRMs resulting from weak global product cracks. Meanwhile, they expect RIL ONG's EBITDA to increase by 4% YoY (-5% QoQ) due to increased production from the KG-D6 block, despite a 19% YoY dip in deepwater gas prices (flat QoQ). Retail EBITDA is expected to report healthy growth of 6% YoY and 5% QoQ due to higher footfall. JIO's EBITDA is projected to surge 13% YoY and 5% QoQ due to high ARPU (up 5% YoY/QoQ each), offsetting a 2% QoQ moderation in subscribers.
Prabhudas Lilladher anticipates a marginal 2.8% QoQ EBITDA growth for RIL, primarily driven by the telecom sector. They forecast telecom EBITDA to increase by 10.5% QoQ driven by a 6% ARPU growth, while the subscriber base remains flat due to SIM consolidation. The retail segment is expected to be largely flat, considering the macro trend in the industry. They expect a marginal 2.8% QoQ growth in retail EBITDA.
Kotak Equities believes that the O2C segment is likely to be impacted by weak macro trends. Although Singapore GRM is flat QoQ, diesel spreads have decreased, and petrochemical margins are expected to decline QoQ due to a sharp drop in PX and Benzene margins. However, they expect higher Russian discounts, the restart of Venezuelan crude imports, and the resumption of European diesel exports to cushion GRMs, limiting the QoQ EBITDA drop to just 3.1%. Oil and gas are expected to be flat QoQ.
Antique Stock Broking expects RIL's results to be flat QoQ due to weak standalone performance. They estimate refining throughput at 17mmtpa and anticipate muted petrochemical performance. Refining margins are also expected to remain subdued due to weak Singapore GRM. Jio is projected to demonstrate steady performance on the back of the recent price hike (0.6% QoQ subscriber growth and 7% QoQ growth in ARPU), while the retail segment's profitability is anticipated to be resilient.
Overall, the consensus among analysts indicates that RIL's Q2 performance will likely be driven by the telecom sector, with Jio benefiting from the recent tariff hike. However, weakness in the O2C segment and potential challenges in the retail sector are expected to temper overall growth. While the exact numbers may vary, analysts agree that the company is likely to report muted earnings for the quarter.
Source: RIL Q2 Preview: PAT may fall 10% YoY; weak O2C seen hurting operational performance