Reliance Industries Q3 Results Review - Petroleum Margins Could Face Recessionary Risk: Yes Securities

Yes Securities Report

Reliance Industries Ltd. reported an inline Q3 FY23, with operating profit at Rs 352.5 billion (up 19% YoY; up 13% QoQ). Strong refinery margins aided by firm middle distillate cracks, improvement in telecom average revenue per user and subscriber base and continued momentum in retail segment sales aided by festive season, were key driver of profitability during the quarter.

However, weakness in global petrochemical demand weighed on polymer and polyester cracks. In the retail segment as well, consumer sentiment turned cautious post festive season.

In our view going ahead, global recessionary concerns, amidst continued capacity addition (refining and petrochemical) could possibly be a key overhang on petroleum spreads, impacting RIL’s operating cashflow in coming quarters, whereas capex requirement remain high.

Caveat to above is a strong revival in Chinese economy and petroleum demand, aiding cracks. In the longer run however investment in petrochemical and renewable capacities along with 5G roll out are potential revenue drivers.

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