Reliance Industries Ltd (RIL) is likely to report muted earnings growth in the first quarter of this fiscal as gains from its telecom business will be offset by weakness in its retail and refining and petrochemicals business, analysts said.
According to a Bloomberg survey of 10 brokers, net profit is expected to come in at ₹7,119 crore against ₹10,104 crore in the same quarter last year. Net sales is estimated at to come in at ₹1 trillion, according to a poll by 11 analysts. The Mumbai based company is scheduled to report its earnings on Thursday.
Centrum Research which expects the first quarter to be the worst in three years for RIL, expects a 49% year-on-year (y-o-y) dip in petchem EBIT, 35% y-o-y dip in retail revenue, and $2.9 per barrel sequential dip in gross refining margins or GRM.
Earnings in RIL’s organised retail segment is expected to be impacted by the pandemic lockdown. According to Axis Capital, retail business is expected to post revenue decline of 15% year on year.
The stock has risen 151% from the lows in March, with a 27.83% jump till 28 July and has rallied 45.17%, outpacing the benchmark Sensex.
Downgrading its rating from ‘outperform’ to ‘buy’, CLSA analysts said while its long-term promise and underweight position in portfolios may support the stock price, large valuation surprises may be difficult in the near term. CLSA set a target price of ₹2,250 factoring in the street-high valuation for Reliance Jio and Reliance Retail. CLSA expects the company’s market capitalization to cross $220 billion by March 2022.
“Strong performance by Jio gets offset by further deterioration in the energy and retail businesses,” said Axis Capital in its research report. It expects RIL’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) to decline 13% year-on-year to ₹18,500 crore.