NEW DELHI: After reporting a lower-than-expected Q1FY2023 results, shareholders have given a major thumbs down to shares of Mukesh Ambani’s Reliance Industries (RIL). The stock of the country’s most valuable firm plummeted over 3% on Monday to close at Rs 2,417 even as many brokerages maintain a ‘buy’ status on the stock. They, however, expect near-term gross refinery pressure for the company, among other challenges.
RIL on Friday reported a 46% year-on-year jump in net profit to Rs 17,955 crore in the first quarter of financial year 2023 (Q1FY23). Most analysts and brokerages were expecting a 2X jump in its net profit to about Rs 25,000 crore.
“O2C business EBITDA up 40% QoQ at Rs 19,900 crore, but this was 14% below our expectation of Rs 23,200 crore due to: a) rise in official selling price for Middle East crude; b) losses on domestic fuel retailing business; c) high opex due to rise in energy and freight cost; d) lower volume due to shutdown of the DHDS unit in refining. We have revised our target price to Rs 2,950 (from Rs 3,000),” said analysts at JM Financial.
Going ahead, slowing demand for crude oil amidst fear of a global recession is expected to weigh heavily on RIL. “Recession fears (are) overtaking oil market fundamentals, resulting in lower prices and margins,” RIL joint CFO V Srikanth said in an earnings call late Friday. Though Reliance did not disclose its gross refining margins (GRM), the Singapore GRM averaged at around $20 a barrel in Q1FY23.
“Singapore benchmark (SG) GRMs of $20.8/bbl was a record, driven by all-time highs of $41.9/bbl in diesel spreads and US$28.8/bbl in petrol. However, concerns of an equally precipitous collapse of demand for crude and products due to recession worries in Western economies and uncertainties on China, have driven SG GRMs down to US$5/bbl by 21st Jul’22,” said analysts at ICICI Securities.