RIL shares edge lower ahead on Q3; here's what to expect

Shares of Reliance Industries (RIL) remain in focus today as the oil-to-telecom conglomerate is slated to release its December quarter earnings post market hours today. The billionaire Mukesh Ambani-led company is expected to report modest growth in the top and bottom line as steady growth in consumer divisions - digital and retail will be offset by weakness in the oil-to-chemicals (O2C) business.

Ahead of Q3 earnings, RIL shares opened higher at ₹2,753, up 0.6% against the previous closing price of ₹2,734.90 on the BSE. The stock, however, soon lost momentum and declined as much as 1.26% from the day’s high to hit a low of ₹2,718.05, while the market capitalisation of the country’s most valued firm slipped to ₹18.41 lakh crore.

Reliance shares touched a 52-week high of ₹2,792.65 on January 15, 2024, rebounding nearly 39% from its 52-week low of ₹2,012.14 touched on March 20, 2023. At the current level, RIL shares have risen over 10% in a year, while it declined 4% in six months period. The stock, however, gained some ground in the recent past, with the stock price climbing 20% since Q2 earnings and 6.6% in the past one month.

Technically, RIL shares are neither in the overbought nor oversold zone with its relative strength index (RSI) at 68.6. Currently, the bluechip stock trades higher than the 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages.

“Reliance has broken out of a multi-month consolidation pattern with a bullish flag formation near its 20-day moving average (DMA). This technical setup suggests the potential for further upside towards the 2900 level. However, option data hints at some resistance near the 2800 strike price, as call writers seem confident at that level. Therefore, a decisive break above 2800 would be needed to overwhelm these call writers and fuel further gains. On the downside, the 20-DMA at 2650 acts as a strong support level,” says Santosh Meena, Head of Research, Swastika Investmart Ltd.

Technical analyst at Choice Broking says that the RIL stock has consistently exhibited range bound movement on the daily chart, indicating a potential continuation of its current trend unless a breakout occurs in either direction. On the weekly chart, the stock is forming a Rectangle pattern with a robust resistance level at 2,800. Despite the sideways movement within this pattern, the stock remains above its 200 weeks moving average, indicating an overall upward trend in the long term.

“Given the technical analysis, we anticipate an upward movement if the stock manages to break the 2800 resistance level. In such a scenario, the potential target range lies between 3200 and 3350. Conversely, the downside is supported at 2250,” says KKunal V Parar, VP, Technical Research and Algo, Choice Broking.

What to expect from RIL Q3 earnings?

Analyst expects RIL to post single digit growth in both profit and revenue amid weakness in refining and petrochemical business due to product cracks and drop in realisations. 

Domestic brokerage JM Financial expects RIL’s EBITDA to decline 1.8% sequentially due to moderation in diesel cracks. However, this will be partly supported by robust growth in exploration and production (E&P) earnings and steady growth in digital and retail business.

The brokerage in its report says that RIL’s Q3 FY24 EBITDA is likely to drop 1.8% QoQ to ₹40,200 due to sharp fall in O2C EBITDA on account of moderation in diesel cracks ($20.3 per barrel in Q3FY24 vs $26.5/bbl in Q2FY24), narrowing of Russian crude discount (to $2-3/bbl vs. $4-6/bbl in Q2FY24) and lower refining throughput due to maintenance shut-down and continued weakness in petchem margin.

O2C EBITDA is projected to decline 11.7% QoQ to ₹14,400 crore due to moderation in gross refining margin (GRM) to $10/bbl (vs. implied GRM of $12.5/bbl in Q2FY24). E&P EBITDA is expected to rise 13% QoQ to ₹5,400 crore due to lower opex and marginal increase in KG D6 gas output; partly offset by cut in ceiling price for HPHT gas (to $9.96/mmbtu for H2FY24 vs ₹12.12/mmbtu for H1FY24).

Meanwhile, digital EBITDA is likely to grow by 2.9% QoQ to ₹14,500 crore due to an improvement in average revenue per user (ARPU) to ₹183 (from ₹182 in Q2FY24) and increase in net subscription by 9 million QoQ.

Retail EBITDA is seen rising by 6.3% QoQ to ₹6,200 crore, driven by rising store count and an increase in footfalls.

The agency has maintained “BUY” on RIL with a revised target price of ₹3,050, saying that its net debt concerns are overdone, and also because it has industry leading capabilities across businesses to drive robust 14-15% EPS CAGR over the next 3-5 years. 

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)