RJio details, GRMs, capex: What to watch out for in RIL's results today

The market watchers are keenly awaiting Reliance Industries Ltd’s March quarter results, which the oil & gas major will announce later in the day. While the company is expected to report strong overall numbers amid growth in the refining and petrochemical segment, all eyes will be on RIL’s commentary on Reliance Jio Infocomm, the group’s telecom venture.

RIL, now an oil-to-telecom conglomerate, has reported growth in profit after tax (PAT) for eight straight quarters, and beaten consensus PAT estimates in six quarters in a row.

"We expect strong earnings, driven by refining and petchem (higher volumes, improved margins). Despite increased losses in domestic E&P (exploration and production), we expect RIL to report a ninth straight quarter on quarter stand-alone PAT growth," analysts with Nomura Research wrote in an April 7 report.

"Reliance Industries’ (RIL) grandiose $20 billion core capex is seeing fruition, which unlike the uncertainties associated with RJio, will instantly bolster earnings," said brokerage Edelweiss Securities in an April 20 research note.

Meanwhile, in a Bloomberg poll, 16 analysts estimated the company’s March quarter revenue at Rs 67,476 crore and profit at Rs 8,016 crore at a standalone level.

For the March 2016 quarter, the company had reported a net profit of Rs 7,320 crore and revenue of Rs 54,189 crore on a standalone basis.

Analysts expect gross refining margins (GRMs) for the quarter in the range of $10.5 to $11.2 a barrel, against $10.8 in the quarter ended December 2016.

Apart from the March numbers, the analysts will also track the management’s commentary on Reliance Jio, which started charging its subscribers for call and data earlier this month after offering free services for several months.

Analysts at J P Morgan say they would not be surprised to see final sign-ups in excess of 100 million, and a large majority of these having also subscribed to the initial recharge of Rs 303 a month to avail of the three-month free offer. While how many of these subscribers sustain will only be known after August, it will be interesting to see what further details RIL gives on RJio.

"Following conclusion of RIL’s ongoing mega capex programme of nearly $48 billion, we expect free cash flow (FCF) to turn positive. With rollout of RJio, capex intensity in the telecom venture will also come off sharply. As capex tapers gradually, we believe cash flows from operations will ramp up with the commissioning of core projects," pointed out Edelweiss Securities in a report.

The market capitalisation of RIL hit a record high last week, briefly beating TCS to become the most-valued Indian company.

Edelweiss Securities, which expects RIL's profits to double in five years, reiterated ‘BUY/SO’ on the stock with a revised target price of Rs 1,600, from Rs 1,452 earlier.

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