Reliance Industries, Reliance Jio Q4FY19 preview: Will Mukesh Ambani-led firms create magic again?

RIL is set to present its Q4FY19 result anytime today and the shares of the company witnessed buying sentiment on Thursday's trading session. The results of Reliance Jio will also be announced today. Ahead of the Q4FY19 result, RIL share price was trading at Rs 1,377.70 per piece up by Rs 32.40 or 2.41% on Sensex at around 1242 hours. On the index, the company has already clocked nearly 3% jump after touching an intraday high of Rs 1,383.95 per piece. Another reason for upbeat in RIL shares, could be attributed to Japan-based Mitsui O.S.K Lines (MOL) which will be acquiring strategic stake in six group companies each owning a very large ethane carrier of RIL. The Ambani-led firm’s wholly owned subsidiary Reliance Ethane (REHPL) have entered into partnership with MOL, where investment will be made by latter and minority investors in the six special purpose limited liability companies (“SPVs”), each owning a VLEC. Transaction closing is subject to regulatory approvals. Post closing SPVs shall be jointly controlled by REHPL and MOL.

Coming back to RIL shares, the company will be in focus the entire day. Many investors are hoping for another stellar result. RIL has been consistently booking profit in, and Q3FY19 was one such good quarter. In Q3FY19, RIL clocked 8.8% jump in consolidated net profit to Rs 10,251 crore compared to a net profit of Rs 9,420 crore a year ago same period. Consolidated revenue from operations stood at Rs 171,336 crore in Q3FY19, registering growth of whopping 55.9% as against Rs 109,905 crore in same period of previous year.

Not only Reliance Industries, even its telecom arm, Reliance Jio, which is widely seen as a disruptor in telecom field (customers of Jio, of course, do not mind as it has brought dirt cheap data offers in its wake), also showed massive growth in back-to-back quarters.  Reliance Jio witnessed a net profit of Rs 831 crore in December 2018 (Q3FY19) quarter, which was an increase of massive 65% compared to net profit of Rs 504 crore in Q3FY18.

In a very proud moment in Q3FY19, Mukesh Ambani, Chairman & Managing Director, Reliance Industries Limited said: “In our endeavor to consistently create more value for our country and stakeholders, our company has become the first Indian private sector corporate to cross Rs 10,000 crore quarterly profits milestone."

Hence, whether RIL continues to create the same magic will be keenly watched. 

For Q4FY19, analysts at IDBI Capital said, “We expect GRM to decline to US$8/bbl vs US$11/bbl in Q4FY18 while Petchem margin to grow to 17.5% vs 16.9%. Retail/digital business profits are likely to grow by 10%/10% sequentially.”

Analysts at Edelweiss Securities said, "We expect consolidated earnings to decline by 5.4% at RIL due to a decline in earnings at refining, petchem and upstream segments. Lower GRM (Q4FY19: USD 8/bbl, Q3FY19: USD 8.8/bbl) along with lower throughput (-7% QoQ) will lead to lower refining earnings (-20% QoQ) while weaker PE cracks will drive lower petchem earnings (-4% QoQ). However, this will be offset by higher earnings at retail and Jio (+10% QoQ).

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Meanwhile, expert at JM Financial said, “We expect RIL to surprise the street as consumer business continues to show sequential growth & commentary around gradual improvement in hydrocarbon margins is expected to remain strong. We expect Q4FY19 GRM to be in range of $8.1-8.3 per barrel slightly lower than Q3FY19 print. GRM are likely to improve given petcoke gasification benefits and improving cracks of gasoline as demand improves. Petchem EBITDA is likely to stay flat sequentially.”

On RJio, JM added, “We expect Q4FY19 of Jio revenues to be up 8-9% qoq and ARPU in range of Rs 126.50 - 127 (marginal ARPU dilution due to JioPhone) for the quarter and continued strong Jio subscriber momentum as company gets close to 400 million subscriber base.”

For Thursday’s trading session, Sameer Kalra, Equity Research Analyst & Founder Target Investing said, "Company is expected to report slight improvement in GRMs and lower refining margins but higher than street estimate due to maintaining shutdowns. The main EBITDA growth is expected of JIO with 8% and Reliance Retail . We expect some deleverage signs also to come in consolidated balance sheet.

Over the holiday the company reported that it has sold stake in VLEC( Very large Ethane Carrier) to Japanese firm. These six VLECs were bought at value of $600mn in 2016 and were operated and managed by the Japanese firm. This would provide second deleverage success after selling the pipeline business recently.