RIL Q2 preview: Profits may dip but Jio and Retail could see sequential improvement

Mumbai: Mukesh Ambani-controlled Reliance Industries may report a drop in its performance from a year ago when it unveils its September quarter earnings on Friday. The company may, however, log a sequential improvement even though full-recovery to pre-Covid levels is yet to happen.

Analysts will also wait and watch company’s take on the legal tussle between Amazon Inc and Future Group, which has put the RIL-Future Group on hold.

Kotak Institutional Equities expects RIL to report a 26.5 per cent drop in net profit, while it believes sales may drop 35.1 per cent.

The brokerage expects petchem segment EBITDA to increase quarter-on-quarter (QoQ) as higher volumes offset weaker margins. Refining segment EBITDA may decline QoQ as lower crude throughput and adverse exchange rate offset modestly higher margins.

Kotak analysts expect higher EBITDA from Jio on a QoQ basis led by a rise in subscriber base to 410 million and average revenue per user (ARPU) to Rs 144/month (+Rs3.5 QoQ) and retail led by sequential recovery in revenues. The ARPU in the same quarter year before came in at Rs 120.

Equirus Capital expects RIL to report a 14.9 per cent decline in net profit, and a 34.1 per cent decline in net sales from a year ago. It expects GRMs to come in at $7.5/barrel, compared with 9.40/barrel a year ago, and ARPU at Rs 142.

Motilal Oswal expects RIL to post a decline of 34.4 per cent in the September quarter net profit, while net sales may drop 23.8 per cent from a year ago.

Goldman Sachs expects RIL’s core EBITDA to grow 6 per cent QoQ. However, it may see a drop of 21 per cent YoY, driven by improvements across all businesses ex refining.

“We expect this improvement to be higher versus peers in each segment driven by lower cost assets and the omni channel strategy driving market share wins,” Goldman Sachs analysts added.

Retail business in focus

Goldman Sachs believes the retail business will be the key focus in the September quarter report card, as it expects 34 per cent QoQ improvement in retail EBITDA though still down 38 per cent YoY.

“RIL’s retail business outperformed peers last quarter and we expect this trend to continue given its omni channel offering driving market share wins. We specifically note the strong app download trend versus peers for RIL’s digital retail assets JioMart (for groceries) and AJIO (for fashion), according to SensorTower,” Goldman Sachs analysts said.

Jio in bright spot

BofA Securities expects Jio to report 5 per cent QoQ revenues rise led by steady QoQ net adds and 2 per cent QoQ ARPU uplift.

“Although small, the ARPU uplift is also influenced by the fixed broadband revenues now added along with cellular revenues. We expect EBITDA margin to improve 25 bps QoQ to 43.5 per cent led by continued revenue growth,” BofA analysts said in a note.

Goldman Sachs expects 2QFY21 Jio revenue/EBITDA to rise up 4-5 per cent QoQ, with 410 million subscribers, which involved an addition of 12 million subscribers in the quarter and ARPU of Rs 142, with the sequential growth driven by sector-leading subscriber addition and delayed translation of ARPU hikes.





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