Stocks of Reliance
Industries may remain subdued next week despite its
slightly-betterthan expected Oct-Dec earnings, as operational performance
has not shown any significant improvement. The company's refining business
lived up to Street expectations with gross refining margins of $7.6 a barrel,
almost flat sequentially despite a weak global environment. Reliance
Industries' net profit in Oct-Dec was 55.10 bln rupees, flat sequentially as
well as year-on-year. The topline for the period was almost in line with
estimates at 1.03 trln rupees, up 10.2% from the year-ago period. The
earnings were boosted mainly by a 32.5% year-on-year increase in other income
and an unexpected improvement in revenue and margins of the upstream
business, which saw income grew 18.4% sequentially. While the improvement in
upstream revenues is seen as positive, it is not sustainable as increase in
condensate volumes and realisations were key contributors. Re-emergence of
other income as a key contributor to profit could rile investors. Shares of
the state owned companies--Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--may face selling pressure early in the week
after petroleum minister M. Veerappa Moily said that the government will soon
hike the quota of subsidised cooking cylinders to 12 from 9 per household per
year. The move will be seen as a setback for the deregulation initiative
taken by the government and may raise fear that the government may also stop
the 50 paise monthly diesel price increase undertaken by these
companies. The steps will weigh on the financials of the upstream
companies--Oil and Natural Gas
Corp Ltd and Oil India Ltd--as well as a majority of the resultant increase in subsidy burden will be borne by them. Shares of both these companies are expected to decline next week. Rupee-dollar and crude prices movements would continue to influence the shares of all the five companies.
Corp Ltd and Oil India Ltd--as well as a majority of the resultant increase in subsidy burden will be borne by them. Shares of both these companies are expected to decline next week. Rupee-dollar and crude prices movements would continue to influence the shares of all the five companies.
