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Reliance Industries starts FY23 with strong profits, driven by refining margins

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  • Analysts at brokerage firms such as YES Securities, Motilal Oswal, HDFC Securities and Equirus believe the oil-to-telecom giant will report strong quarterly earnings, driven by refining, telecom and retail operations.
  • Jio is expected to see subscriber additions after three quarters of the declines.
  • Reliance Industries is scheduled to report April-June quarterly results tomorrow, July 22.

Equity markets that have been bullish over the past two sessions may have another reason to celebrate, as Mukesh Ambani-led Reliance Industries is expected to present a strong earnings report for the April-June quarter, thanks to high crude prices.

So far in 2022, crude oil prices had risen to $140 a barrel, the highest in 14 years after Russia invaded Ukraine. RIL, which has one of the largest export-oriented refineries in the region, has gained as gasoline cracks have also increased with crude in recent months.

According to some estimates, net profit could increase by a large percentage. “PAT is growing at a healthy 74%, helped by strong performance in Reliance,” said YES Securities analysts.

Telecombiz to see subscriber growth too

And it’s not just the refining industry that holds sway. Analysts at brokerage firms like Motilal Oswal, HDFC Securities and Equirus also believe it will report a strong quarter for telecom and retail operations.

“RIL expected strong earnings growth on both a YoY and QoQ basis, supported by significantly stronger refining profitability, along with continued improvement in the telecom ARPU,” analysts at YES Securities said.

Analysts at Equirus say: “Strong quarter led by robust performance in the refining segment. Jio ARPUs are increased by an improved user mix.”

While there could be sequential improvement in average revenue per user for Jio and continued growth in retail, the petchem segment is likely to remain a drag, HDFC Securities said.

A highly inflationary market has impacted smartphone sales, leading to low subscriber numbers for major telecom companies such as Trust JioBharti Airtel and Vodafone Idea.

However, things are expected to turn slightly positive for Jio, as analysts believe the telecom operator will add about six million subscribers after three quarters of decline.

“With smartphone shipments declining in April-May and channel inventory remaining high, data subscriber additions should also see a moderation. Only Jio’s results should reflect the impact of the rate increase as it has a high subscriber base on prolonged reloads. Now that Jio’s subscriber cleanup is complete, we estimate it will lead to subscriber additions, followed by Bharti,” said an Emkay Research report.

Aside from corporate profits, investors are closely monitoring developments in the 5G spectrum auction that will shape the future growth of these telecom companies. Billionaire Mukesh Ambani has landed the highest of them all – ₹14,000 crore as serious cash for the 5G spectrum auction.

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