Reliance Jio commentary to be highlight of RIL’s Q4 results on Monday

Dalal Street will be eyeing management commentary on telecom venture (Reliance Jio) as Reliance Industries reports its March quarter performance on Monday, April 24. Analysts at J P Morgan say that “Reliance should report another strong quarter, though core business has become less relevant from a stock perspective, as all focus is on the telecom segment (RJio).”

Meanwhile, the March quarter performance will still be driven by performance in its core refining and petrochemicals segment as contributions from Telecom venture will only be to the extent of prime membership enrollments.

Analysts estimate quarter ending March to be strongly led by core refining and petrochemicals segment only. Analysts at Jefferies expect Reliance to report further earnings improvement in the quarter with standalone Ebitda up three and five per cent on year-on-year and sequentially basis respectively, helped by better refining and petrochemicals performance.

Petchem profitability is expected to increase year-on-year, led by improved deltas. Monoethylene Glycol and Butadiene continued their strong performance and were up more than 50 and 75 per cent sequentially according to analysts at BNP Paribas who add that Paraxylene (PX) margins continued their steady recovery and were up seven per cent sequentially. The refining margins, however, may be slightly lower looking at Weakness in Benchmark Singapore GRM’s in the back of weak demand. Reliance is expected to report GRM of $10.2 per barrel versus $10.8/bbl in 3QFY17 and $10.8/bbl in the year-ago quarter say analysts at Motilal Oswal who however expect Petchem Ebitda per tonne to increase to $300 compared $271.6 seen in the year-ago quarter.

The company’s investments in Refining and petchem segment are ripe to reap results. The process has already begun with the commissioning of the first phase (50 per cent capacity) of its 2.2 million metric tonne per annum paraxylene (PX) expansion project at the Jamnagar petrochemicals complex. While this commissioning is a key milestone, it was to be followed by the refinery off-gas cracker with 3.3 million tonne per annum capacity which is lined up for commissioning soon. The updates on the same will also be looked at by the street as also commissioning of a pet-coke regasification project that was to come on stream by mid-2017. These expansions are to accrue further benefits from the Q2FY18 post stabilisation of expansions and third quarter of FY18 may be a stronger quarter for RIL.

Downstream projects and capex will also be looked out for though rupee appreciation is to accrue benefits. Translation gains on its substantial foreign currency debt, on account of rupee appreciation, should reflect in reported capex for the quarter being lower than $1.3 billion say analysts at Jefferies who also expect Sale of stakes in GAPCO to reflect as one-off gains in the consolidated Profit and Loss statement.

Meanwhile, the eyes will be on final enrollment numbers for prime membership Company already had announced 72 million prime customers at the start of April before the enrollment time being extended. Analysts at J P Morgan say that we 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 Rs303/month to avail the three-month free offer. While how many of these subscribers sustain would only be known after August, it would be interesting to see what further details RIL gives on RJIO.

The stock prices already have seen highs of Rs 1488.50 in the first week of April, the levels that were not seen in last eight years as prime customer base came better expectations. Analysts expectations on Reliance Jio achieving a faster breakeven have increased and some earning upgrades from Fy19 onwards have already been seen. Anymore positive surprises could lead to further upside for the stock trading at Rs 1,407.30 levels