Jio may take over RIL's core business profits 6 quarters down: Deven Choksey
When it comes to Reliance’s petrochemicals business, the strength in GRMs clearly seems to be at par and seems likely to support the company in the second quarter performance as well.
When it comes to Reliance’s petchem business, the strength in GRMs clearly seems to be at par and seems likely to support Reliance in the second quarter performance as well?
Yes. Look at the second quarter and the Singapore GRMs. Singapore GRM has by and large operated in the vicinity of $6.5 per barrel. Reliance normally ends up producing an alpha of around $3.5-4 over the Singapore GRM. That is a benchmark on which the refinery is working. The possibility of refining margins coming back to $10-10.5 per barrel in this particular quarter is distinctly there.
If you look at the refining cracks, except LPG, rest of the cracks have actually shown an up move and the uptick in the current quarter ended September, as far as their pricings are concerned. Given a situation where Reliance has ended up supplying more refining products due to the disturbances in the Gulf region, I would think that the margin on the refining side would be remaining on the higher side.
On the other side, the petrochemical business is likely to be rating at production level of around 10 million metric tons per quarter which means a total capacity of around 40 million metric tons on which the petrochemical business is likely to produce the volume in this quarter.
Though there might be some amount of pressure on the margin this quarter, but overall the contribution from the energy portfolio business which is the refining and petrochemical, is likely to be far superior. We believe that somewhere around Rs 11,800-11,900-crore EBIT contribution would be coming from the energy portfolio of products as far as Reliance is concerned in this quarter.
What about the consumer business? More than the numbers, what do they say about the future outlook? Will the sort of metrics they deliver be much more important?
Yes, absolutely. The consumer business portfolio consists of retail and Jio and you have seen probably seen marked growth. In fact, when I did the year-on-year and quarter-on-quarter kind of number and the expected number for the current quarter, I find that in the current quarter, the EBIT contribution from consumer business could be somewhere around Rs 5,200-5,300 crore vis-à-vis the year-on-year contribution of around Rs 3,700 crore and the last quarter contribution of somewhere around Rs 4,700 crore.
Obviously, this engine is running at around 45-50% kind of a growth as far as contribution to the EBIT is concerned. That is where this business is likely to grow faster. Jio Fiber has a kind of narration in it, wherein you are likely to see the growth on a sequential basis of around 10-15%. That could possibly translate at the end of Q4 to a growth in excess of 55-60% as far as Reliance portfolio from the consumer business is concerned.
Jio definitely appears to be taking over the core business profits somewhere down the line six quarters from here. That is our take.