RIL Beats Street Expectations, Clocks A Net Profit of Rs 5502 Crore

Reliance Industries, India's most valued company surprised the street by reporting a net profit of Rs 5502 crore. It was expected to clock in a net profit growth of around 12-14%, but the company beat these estimates by reporting a 24% growth in the net profit on a YoY basis. Its total revenues stood at Rs 93886 crore, up 10.28% on a YoY basis.

Gross Refining Margins (GRMs) stood at USD 9.6 per barrel against USD 6.8 per barrel a year ago. Exports grew by 16.6% to Rs 66915 crore on quarter on quarter basis. It is after many quarters that Reliance has come up with really good numbers and the market will definitely cheer its earnings reports in the coming week. The stock is once again likely to be in favour, particularly owing to the twin effect of its good performance and the government move on deregulation of diesel prices. In fact the market was already anticipating a good set of numbers after Essar Oil had announced GRMs of over USD 9 per barrel indicating toward RIL coming up with better earnings during the quarter.

RIL has reported a 36 basis points jump in its EBITDA margins to 8.92%. It is for the first time in the last five quarters that RIL has reported a jump in its EBITDA margins. As a percentage of sales the company has reported a decline of about 300 basis points in its raw material costs on a sequential as well as YoY basis.

Its depreciation expenses during the quarter, declined by 4.4% on a YoY basis which also bettered its net profit. Other income increased marginally to Rs 1740 crore. During the September quarter of 2012, the company had reported an other income of Rs 2112 crore and hence the other income in the December quarter of 2012 is less by 17%.

It has signed a 15 year heavy crude oil supply contract with Venezuelan state oil company Petroleos de Venezuela ((PDVSA). As per this contract, PDVSA will supply about 0.3-0.4 million barrels of Venezuelan heavy crude oil to RIL's Jamnagar refinery which will improve its performance going ahead.

Mukesh Ambani, CMD of Reliance Industries said that the company is investing Rs 1 lakh crore on capacity expansion which will improve its earnings going ahead.

RIL's shares which have been gaining steadily on the bourses during the past week would show a strong positive opening on Monday. You could see RIL's shares touching levels of Rs 960 providing an upside of about 7% over the next few days. Many brokerage houses are also raising their targets on the stock and hence one should buy the scrip with long term horizon.