RIL's standalone net profit rose one per cent quarter-on-quarter
Most research notes attributed RIL's strong performance in April-June quarter to solid refining business environment and improved petchem margins.
RIL's standalone net profit rose one per cent quarter-on-quarter and 12 per cent year-on-year to Rs 6,318 crore (Rs 63.18 billion).
Credit Suisse said RIL materially increased disclosures on the telecoms segment. "Large-scale testing will happen over the next few weeks, while the commercial launch is expected by December, 2015."
BofAML said stronger than expected refining performance was offset by a slower rebound in petchem and lower profit at domestic E&P in Q1.
US shale was loss-making while retail performance was in line. RIL remains upbeat on the near-term downstream outlook.
However, E&P is likely to remain a drag. High-growth retail is a positive but is not big enough, it said.
Barclays said while profit in April-June was higher as refining margins rose to a 6-year high, but downstream margins may ease in Q2 and medium-term outlook appears resilient, driven by benign demand-supply balances.
"This bodes well for Reliance, which is also likely to complete its key projects in the next year, driving earnings per share up 47 per cent in FY15-18 along with higher return on capital employed (ROCE) and lower leverage," it said.
UBS said petchem profits will stay strong in Q2, with July a good start particularly for polymer and polyester intermediaries margins but gross refining margins (GRM) may see seasonal weakness.
However, RIL management is upbeat on favourable outlook in second half with sustained gasoline demand, its superior complexity advantages and likely global refinery capacity shutdowns.
Also, encouraging progress has been made on downstream expansion ($12 billion of the $16 billion capex done) all of which will be operational in phases through 2016.
US Shale JVs profits under pressure, but low opex and pipeline asset sale for USD 1.07 billion will help, it said, adding that telecom capex is an overhang but "a successful launch technologically in December and good subscriber addition could help offset the investors' extreme scepticism."
On the telecom launch, CLSA said the company plans to use 75,000 base stations, 100,000 small cell sites connected to grid electricity and battery back-up to keep opex low.
Reliance Jio, the telecom venture of RIL, "does not see the need to offer handset subsidies due to the availability of affordable devices. The company is working with almost all the leading brands to ensure a wide range of devices and will also offer its own branded devices," it said.
Morgan Stanley said it estimates incremental pre-tax profit at $3.2 billion from downstream expansion projects and assume half of the benefit to flow in FY17.
Macquarie said $3 billion cost hike on $14 billion Jamnagar downstream projects ($12 billion spent) could be a drag. Also, Reliance Jio spend by launch could be about $16 billion.
KG-D6 gas output was flat at 11.6 million standard cubic meters per day.
Goldman Sachs said it expects RIL's earnings to inflect in FY17 as core projects start delivering. "However, we remain concerned about the magnitude and returns of telecom capex."
Citi said though near-term earnings momentum may weaken - a sequentially weaker Q2 led by a pullback in GRMs could cap near-term stock upside. Petchem margins, however, have stayed robust.
HSBC said RIL plans to launch its telecom services by 2015-end with full range offerings across the communication ecosystem, including voice, data, cloud, and other value added services.