RIL May Post Record Net on its Refining Strength

Co expected to report net profit of . 5,650 cr, a 20% growth Y-o-Y

India’s largest private sector petroleum company, Reliance Industries (RIL), is expected to sign off FY11 on a strong note when it announces its last quarter results on Thursday.
Notwithstanding the dwindling gas production from its KG basin fields, analysts expect strong performance by RIL’s refining division to take its profits to a new high.
The company’s natural gas volumes stagnated during the quarter and is likely to average around 51-52 million standard cubic metres per day (MMSCMD). This was a cause of concern for the company, which saw its share price fall below . 900 in early February. However, the company’s deal with BP to sell 30% stake in 21 petroleum E&P fields boosted investor confidence, taking the share price beyond . 1,000.
The refining segment of RIL is likely to be the star performer in the March quarter. “Singapore complex GRMs have averaged around $7.5 per barrel in Q4FY11. Reliance, with its usual complexity premium, should be able to achieve around $10 per barrel in the quarter,” Elara Capital said in its research note.
The company had to shut down its fluidised catalytic cracking unit (FCCU) for six weeks for maintenance. The unit converts heavy lowvalue products into lighter, more valuable ones.
The shutdown will, to some extent, have a negative impact on the refinery margins.
Edelweiss Capital expects RIL’s refinery throughput at 16.9 million tonne for the quarter, “and GRMs to improve to $9.7 per barrel — low due to shutdown of FCCU for six weeks — on the back of improvement in diesel and gasoline cracks”.
The performance of RIL’s petrochemicals segment remains mixed with some sections gaining and others losing on margins.
Angel Broking’s report on results preview said: “Polymer margins are expected to dip slightly on account of the reduction in polymer demand due to higher prices although polyester margins continue to be higher because of the tighter global cotton market.”
The company’s net profit is expected to be between . 5400 crore and . 5650 crore, which will be a 15-20% growth over the corresponding quarter of last fiscal year. At this level, it will be the company’s highest ever quarterly profit from operations.
The scrip currently trades at around 16.2 times its expected net profit for the entire FY11.