RIL is set to disclose its third-quarter results today, revealing insights into the conglomerate’s performance and influencing stock trading strategies.
As anticipation builds, market participants are expected to exercise caution, avoiding open positions ahead of the weekend.
Throughout January, the company’s stock has witnessed a nearly 6% surge. The sustainability of these gains hinges on RIL’s earnings and the outlook it presents.
Here are some key points to monitor in RIL’s Q3 Earnings
- Consolidated Earnings:
-
- RIL is projected to experience year-on-year (YoY) earnings growth, driven by the consistent performance of its digital and retail segments.
-
- However, the growth is anticipated to be in single digits due to a weaker performance in the oil-to-chemicals (O2C) business.
-
- Consolidated revenue is expected to increase by 5% YoY to Rs 2.31 lakh crore but decline by approximately 2% sequentially, based on estimates from nine brokerage firms.
-
- Consolidated net profit is forecasted to grow by 9.3% YoY to Rs 17,257 crore but exhibit a nearly 1% sequential decline.
-
- Earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to rise by 4% YoY to Rs 40,030 crore but face an 11% sequential drop.
-
Segment Performance
- Reliance Jio Infocomm is poised to deliver positive results, driven by a further increase in subscribers and an uptick in the average revenue per user (ARPU). Analysts anticipate a net addition of 9.5-10 million subscribers in the last quarter, with Prabhudas Lilladher forecasting a 1.6% sequential improvement in ARPU to Rs 185.
- The retail business, a significant contributor to RIL’s revenue and EBITDA, is expected to perform well, benefiting from increased footfalls at stores and improved operating leverage.
- Conversely, the oil-to-chemicals business is anticipated to witness a decline in earnings on both a YoY and sequential basis, attributed to weakness in refining and petrochemical margins.
-
Traders and investors will closely watch these factors to make informed decisions regarding RIL’s stock in response to the Q3 results.
Historical data indicates that RIL shares have generally shown underperformance following earnings announcements, with no significant surprises in the backdrop.
Over the past eight quarters, the stock has witnessed declines in five instances. Notably, the most substantial corrections occurred after the December quarter of 2022 and the March quarter results in 2023, with a 4% dip on both occasions.
As the company approaches its latest earnings release, RIL shares are currently trading close to their all-time highs, suggesting a positive trend from a medium to long-term perspective.
However, the derivatives perspective reveals notable short covering in the December series, continuing into the current series. This trend indicates a cautiously optimistic stance, as highlighted by Rajesh Palviya, SVP and Head of Technical & Derivatives at Axis Securities.
While technical charts point towards the potential for a sustained multi-month breakout, the stock presently finds itself in the overbought zone. Consequently, experts like VLA Ambala of Stock Market Today recommend patience to allow prices to cool off before making any significant moves.
Examining the options market, the highest open interest concentration among call and put options is observed at the Rs 2800 strike and Rs 2600 strike, respectively. This suggests that RIL is likely to trade within this range for the current series, according to Palviya.
For traders with a low-risk profile, Palviya suggests adopting a call spread strategy. This involves buying one lot of Rs 2720 strike call option at Rs 50 and simultaneously selling one lot of Rs 2800 strike call option at Rs 22.
If RIL closes above Rs 2,800 on expiry, the trader stands to make a profit of Rs 13,000. On the other hand, if the stock closes below Rs 2,720, the maximum loss incurred will be Rs 7,000.
The Last Bit, the market anticipates Reliance Industries’ Q3 results with a keen focus on historical trends and trading strategies. While RIL shares have historically underperformed post-earnings, the current derivatives outlook signals a cautiously optimistic stance.
Investors are advised to navigate this dynamic landscape with a watchful eye on the stock’s overbought status and the options market’s implied trading range.
As the conglomerate unveils its Q3 performance, strategic patience and well-calibrated trading approaches are recommended for market participants seeking to capitalize on potential opportunities.
