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RIL’s best yet to come, say brokerages

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New Delhi: Reliance Industries’ petrochemical division has overtaken oil refining to become the largest earnings contributor segment for the company, brokerage firms said applauding the firm’s robust earnings in FY18, saying the best is yet to come.
In comments on RIL’s January-March and 2017-18 fiscal year earning statement, HSBC said strong petchem performance was offset by telecom arm Jio earning lower-than-expected average revenue per user.
RIL’s Q4 earnings were driven by strong petchem performance that came from higher volumes from new paraxylene, refinery offshore caracker (ROGC) and downstream units, and higher margins from polypropylene, polyester and fiber intermediate products.
Jio subscriber net additions remain strong at 26.5 million during the quarter but results a miss due to lower-than-expected average revenue per user at Rs 137, it said adding refining margins dipped to USD 11 per barrel due to lower throughput and adverse Brent-Dubai differential.
Goldman Sachs said, “The key driver of growth was the petrochemical division, which grew 10 percent quarter-on-quarter, and is now the largest segment earnings contributor, overtaking refining.”
Refining margins missing forecasts were offset by strong growth momentum from the retail business. Revenues from Jio were in-line with estimates with higher subscribers offsetting lower average revenue per user (ARPU), it said.
“With the shares continuing to do well investors may wonder whether earnings momentum has already played out and shares are fully valued. However, we believe the best is yet to come,” it said.
Goldman said it expects pre-tax profit or EBITDA to further grow by 35 percent in the year to March 31, 2019 after growth of 40 percent in 2017-18 fical. Growth will largely be driven by the petchem business reaching full earnings power in the coming quarter while growth momentum from Jio and retail will continue, it said.
With earnings power of new projects evident during FY19, RIL is expected to generate USD 6 billion in free cash flow as capex in both the core business and the wireless business is largely done.
“We expect management to use free cash flow to pare down leverage, which has increased versus history,” it said.
Citi said RIL’s 3 of the 4 downstream expansions have now fully stabilised and ramped up. “Phase 1 of petcoke gasification is currently under stabilisation, while phase 2 of the gasifiers is under commissioning,” it said adding as Jio’s first stage of 4G coverage nears completion, the focus has shifted to Fiber to the home (FTTH) and enterprise (commercial launch shortly, but will be gradual.
Morgan Stanley said with new projects all underway, earnings have begun to fire on most cylinders with a downstream upcycle and crude price tailwinds. “RIL’s energy earnings remain amongst the most stable of global peers and continue to anchor growth, while retail/telecom rapidly raise domestic leadership.”
While Q4 petrochemical segment earnings reflected the impact of full downstream chemical integration, rising polyester spreads and cheap ethane feedstock, oil refining was good but can be better, it said.


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Sensex sheds 298.82 to close at 38,811; Nifty shrinks to 11,650

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Mumbai: The benchmark BSE Sensex erased early gains to end 299 points lower Thursday as investors booked profits after stocks soared to record highs after BJP’s strong showing in the Lok Sabha polls.

Sensex and NSE Nifty went on to record highs even as Lok Sabha election results showed that PM Modi-led NDA leading on over 300 seats. However after the euphoria during the morning session, Sensex shed 298.82 to close at 38,811 and Nifty shrank to 11,650 on the closing bell.

During the day, the Sensex hit the 40,000 mark while the Nifty crossed the 12,000-level for the first time ever. However, the indices succumbed to profit booking towards the fag-end of the session.

 

The 30-share Sensex tumbled 298.82 points, or 0.76 per cent, to close at 38,811.39. Similarly, the broader NSE Nifty settled 80.85 points, or 0.69 per cent, lower at 11,657.05.

IndusInd Bank was the biggest gainer in the Sensex pack, rallying 5.23 per cent, followed by Hero MotoCorp, Coal India, Yes Bank, PowerGrid, ICICI Bank, HCL Tech, L&T, Kotak Bank and Bharti Airtel, rising up to 1.56 per cent. On the other hand, Vedanta, ITC, Tata Motors, HDFC twins, Bajaj Finance, Sun Pharma, Tata Steel, TCS, ONGC and Infosys fell up to 5.53 per cent.

Riding on a massive Modi wave sweeping through most parts of India, the BJP was set to return to power Thursday as it led in 298 seats while the Congress trailed far behind with 52, according to trends released by the Election Commission for all 542 seats that went to polls.

“Markets were initially enthused to see the election results falling in line with the exit polls. However, the run up to the D-day was so sharp that it turned out to be a sell on news phenomenon,” said Devang Mehta, Head – Equity Advisory, Centrum Wealth Management.

Participants would now be keen to know the future course of action for bringing the economy back on track, solution to the liquidity situation, the union budget, onset and progress of monsoon in June and most importantly the earnings trajectory, he added.

According to traders, weak cues from other global markets and a depreciating rupee also weighed on investor sentiment. The rupee depreciated 37 paise to 70.04 against the US dollar in afternoon trade. Globally, bourses in Asia ended in the red.

Indices in Europe were also trading on a negative note in early deals. Brent crude, the global oil benchmark, was trading 1.79 per cent lower at USD 69.72 per barrel.

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Silver up on increased offtake; gold steady

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New Delhi: Silver prices rallied by Rs 200 to Rs 37,400 per kg in the national capital on Thursday, while gold held steady, according to the All India Sarafa Association.

Traders said silver prices rose on pick-up in offtake by industrial units and coin makers at the local spot market. Globally, spot gold was trading marginally higher at USD 1,276 an ounce, while silver was slightly up at USD 14.53 an ounce in New York.

In the national capital, gold of 99.9 per cent and 99.5 per cent purity dropped by Rs 10 each to Rs 32,670 per ten 10 gram and Rs 32,500 per 10 gram. Sovereign gold, however, held steady at Rs 26,500 per eight gram.

 

Silver ready surged Rs 200 to Rs 37,400 per kg, while weekly-based delivery fell by Rs 66 to Rs 36,234 per kg. Silver coins held flat at Rs 79,000 for buying and Rs 80,000 for selling of 100 pieces.

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India PC mkt declines 8.3 per cent to 2.15 mn units in Jan-Mar qarter

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New Delhi: Personal Computer (PC) shipment in India fell by 8.3 per cent in the January-March quarter of 2019 to 2.15 million units, registering a year-on-year decline for the third consecutive quarter, according to research firm International Data Corporation (IDC).

Besides, big commercial deals, market remained weak due to weak consumer demand, high inventory from previous quarters, and supply issues for Intel chips.

Shipments in the consumer segment saw a 26.5 per cent dip in the said quarter compared to the year-ago period. The commercial PC market saw a total shipment of 1.35 million units in the said quarter, a growth of 7.3 per cent over last year.

 

“The announcement of central elections on March 10, 2019 resulted in the model code of conduct coming into immediate effect further resulting in a delay in execution of government projects and impacting the commercial segment,” IDC said in a statement.

However, IDC expects the overall PC market in India to witness a growth in the second quarter. The commercial market is expected to pick up post new government formation in May, while the consumer market is expected to pick up largely driven by back to school campaign by vendors and online sales.

HP maintained its leadership position with an overall market share of 28.1 per cent in the first quarter of 2019, followed by Dell (25.9 per cent), Lenovo (25.2 per cent) and Acer (11.7 per cent).

The notebook PC (laptop) category accounted for 61.4 per cent of the shipment and witnessed a 9.8 per cent year-on-year decline.

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