INSUBCONTINENT EXCLUSIVE:
company.
The first noticeable increase in phone services tariffs in about five years helped Reliance achieve double-digit quarterly earnings
growth, which was further undergirded by profitable expansion of the retail footprint that now touches 7,000 towns.
Earnings growth was 5
per cent higher than consensus quarterly EPS estimates, and the average earnings beat in the past 19 quarters is 11.3 per cent, according to
Bloomberg.
The stock gained 38 per cent in the past one year, and its 12-month rolling EPS has been upgraded 18 per cent in the same period,
with the telecom business at the vanguard of the rating upgrades
The next milestone for stock re-rating is deleveraging, with the company promising to be net debt positive by March 2021.
The capex cycle
has already peaked, with Reliance incurring capital expenditure of Rs 14,015 crore in the December quarter, about half of the past
ten-quarter average of Rs 25,342 crore
Cash profit exceeded capex.
Growth in the energy segment was more circumspect due to tapering demand for petroleum products and capacity
The regional GRM dropped to $1.2 per barrel, a 69-quarter low, in the December quarter against $6.1 in the previous quarter due to a
precipitate fall in the prices of fuel oil
of $4-4.5 to the regional benchmark due to its high complexity
However, the uptick in diesel margins has not materialised as anticipated due to implementation of new sulphur emission norms for ships.
The
Street has pruned its GRM projection for FY21 and FY22 by $1-1.5 per barrel and is currently factoring in $11 and $10.5, respectively
GRM for RIL for the first nine months of FY20 stood at $8.8 per barrel, compared with $9.5 in the same period in FY19.
Moderation in global
growth weighed on the petrochemical business
Consequently, prices of paraxylene, PTA and ethylene dropped 2-12 per cent sequentially
This affected revenue and profitability of the petroleum segment
Operating profit of the petrochemical segment dropped 28 per cent to Rs 5,880 crore and margins reduced 209 basis points to 15.9 per
cent.
By contrast, operating profit in the telecom segment climbed 38 per cent to Rs 5,601 crore
It added 15 million subscribers and average revenue per user (ARPU) rose to Rs 128.4, boosted by increase in tariffs and broader industry
With the Supreme Court ruling on adjusted gross revenue (AGR) liabilities likely to reduce competition further, the telecom business is
expected to turn in an even better performance.
According to Motilal Oswal, the adverse position of Vodafone Idea could result in market
share gains for Reliance Jio and Bharti Airtel, potentially boosting EBITDA by as much as Rs 25,000 crore.
