Reliance Industries Q2 results preview: Oil to chemicals biz to see strong growth on back of refining segment

Reliance Industries will report its financial results for the July to September quarter on Friday, October 27. Analysts expect the Mukesh Ambani-led conglomerate’s oil to chemicals (O2C) and exploration and production (E&P) segments to show strong growth for the quarter under review.

For Reliance’s O2C business, a strong refining segment shall offset the weak petchem segment, analysts polled by CNBC-TV18 suggested.

This comes as petrochemical prices declined a percent sequentially and 13% on a year-on-year basis in the second quarter of 2023-24. The petrochemical margin, meanwhile, declined 15% on a quarter-on-quarter basis and 23% annually.

It must also be noted that Singapore's gross refining margin (GRM) — what refiners make on processing every barrel of crude into diesel, petrol and other products — expanded to $9.8/barrel in the quarter ended September from $4 per barrel in the preceding quarter and that is likely to have an impact on Reliance’s earnings.

Kotak Institutional Equities expects the O2C segment’s operating performance to improve. According to the brokerage’s estimate, the company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) to go up 4% sequentially and 33% annually for the quarter to ₹15,905 crore.

The refining GRM is projected to rise 13% on a quarter-on-quarter basis and 30% on a YoY basis at $11.2 per barrel while the refining throughput shall rise a percent QoQ and 3% YoY to 17.3 million tonnes, Kotak said.

Reliance Industries’ E&P segment, meanwhile, is expected to see the strongest growth due to high gas production. As per Kotak’s estimates, gas volumes for the quarter shall be up 19% QoQ and 38% YoY at 27.9 million metric standard cubic meters per day (mmscmd). Gas price during the quarter went up 7% QoQ and up 9% YoY to $11.2 per metric million British thermal unit (mmbtu). The company’s EBITDA is expected to increase 22% QoQ and 54% YoY to ₹4,886 crore, Kotak said.

In the June quarter, the O2C segment missed estimates due to a sharp fall in fuel cracks from exceptionally high levels in the corresponding quarter of last year. The margin, however, was at a multi-quarter high with EBITDA up 47% at ₹4,015 crore and operating profit margin at 87%.

Meanwhile, in the first week of July, Reliance Industries and BP Plc started production from the MJ field in the KG basin. MJ field is the last of the three projects of RIL-BP, the consortium. The three clusters are expected to meet 15% of India’s gas demand. Also, estimates suggest peak gas production from the three fields is expected to be around 30 mmscmd.