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RIL Q1 results preview: Operating profit likely to record triple-digit growth

All eyes will be set on Reliance Industries (RIL) on Thursday as the conglomerate will announce its financial performance for the quarter ending June 30, 2022 (Q1FY23). Its subsidiaries Reliance Jio and Reliance Retail will also present their quarterly results on this day. Ahead of earnings, investors had a cautious tone on RIL shares on exchanges. In Q1 of this fiscal, spike in petrol and diesel prices are likely to drive RIL’s refining margin which in turn will lead to strong growth in the O2C segment. RIL’s consolidated operating profit may record triple-digit growth due to robust O2C business. The retail and telecom business will continue to gain traction.

On BSE, RIL shares closed at 2487.40 apiece down by 14 or 0.56% on Friday. The heavyweight’s market valuation stood at 16,82,759.77 crore. RIL is the largest company in terms of market share on exchanges.

In FY22, the Mukesh Ambani-backed RIL became the first Indian company to ever clock an annual revenue of more than a whopping $100 billion. In fiscal 2021-22, RIL’s annual consolidated revenue stood at 792,756 crore ($104.6 billion) rising by 47% yoy. The company’s annual PAT neared the $10 billion mark, as it stood at 67,845 crore ($9 billion) increasing by 26.2% yoy. Annual consolidated EBITDA stood at 125,687 crore ($16.6 billion) up by 28.8% yoy.

RIL posted strong growth in retail, digital services, and oil & gas business during FY22. Annual revenue of retail business reached nearly 2 lakh crore, while EBITDA clocked an all-time high of 12,423 crore ($1.6 billion). Meanwhile, the annual revenue of digital business crossed 1 lakh crore mark and its EBITDA stood at a record of 40,268 crore ($5.3 billion). Oil & Gas’ annual operating profit reached seven year high of 5,457 crore ($720 million).

In the fourth quarter of FY22, the company’s profit to owners stood at 16,203 crore on a consolidated basis, increasing by 22.4% compared to 13,227 crore a year ago same period. Consolidated revenue jumped by 36.79% to 211,887 crore in Q4FY22 against 154,896 crore in the same quarter last year.

How does RIL’s Q1FY23 likely to be?

Harshal Mehta and Amogh Deshpande, Research Analyst at ICICI Direct in their oil and gas Q1FY23 preview report said, “RIL’s consolidated EBITDA is estimated to grow 102% YoY to | 47108 crore, mainly led by O2C segment. On a QoQ basis, it is expected to grow 50%. Reliance Jio (Jio), after last three quarters of Sim consolidation impact, is expected to lead sub addition with ~6 million net sub additions during Q1. The monthly ARPU, like peers, is anticipated to witness growth, driven by residual benefits of tariff hike and higher number of days, at ~4% QoQ at 174. EBITDA at 10,782 crore, is likely to grow 2.6% QoQ. Overall EBITDA margins are expected at 50%, down 30 bps QoQ with net profit at 4420 crore, up 6% QoQ.”

The duo added, “We expect Reliance Retail to report a robust operational performance in Q1FY23E with revenues on a favourable base increasing 60% YoY to 61466 crore. Core retail revenues (excluding connectivity) is expected to nearly double YoY led by strong recovery in fashion and grocery segment. Expect absolute retail EBITDA to increase 90% YoY to 3655 crore. Sharp growth in GRMs (partially offset by weaker petchem profitability) is expected to lead to growth of 106% QoQ (and 139% YoY) in O2C EBITDA to 29270 crore. E&P EBITDA is expected to improve 210% YoY to 2473 crore, mainly on account of realisation growth.”

ICICI Direct analysts expect RIL to report a revenue of 2,31,501 crore in Q1FY23 up by 60.4% yoy and 9.3% qoq. While PAT is expected at 27,909 crore up by a whopping 127.4% yoy and 72.2% qoq.

On the other hand, Dayanand Mittal an analyst at JM Financial said, “RIL’s 1QFY23 EBITDA is likely to be up 33% QoQ at 418 billion based on the following assumptions: a) O2C EBITDA likely to rise 63% QoQ to 232 billion due to sharp jump in refining margin (to $22/bbl) due to spike in petrol and diesel cracks to $40- 50/bbl on account of supply-side concerns; however petchem margins to remain weak due to weak polyester margins on account of Chinese lockdowns; b) Digital EBITDA likely to rise 3.4% QoQ to 116 billion due to rise in ARPU to 174 (from 168 in 4QFY22); net subscribers are likely to rise by ~4.5 million QoQ (vs net subscribers decline of 11mn/9mn/11mn in 4QFY22/3QFY22/2QFY22 due to cleaning up of low-ARPU inactive subscribers); and c) Retail EBITDA likely to grow by 9.0% QoQ to 41 billion.”

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