Reliance Industries Q3 Results Preview and Strategy

As Reliance Industries gears up to announce its results for the third quarter of FY25 on Thursday, January 16, all eyes are on the company’s performance across its key business segments. With experts predicting strong growth driven by its telecom and refining businesses, let’s dive deeper into what to expect from Reliance Industries Q3 results, the potential stock movement, and some strategic options traders can consider ahead of the earnings release.

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Reliance Industries Q3 FY25 Earnings Preview

Revenue Outlook:

Reliance Industries is expected to report a slight rise in consolidated Q3 revenue, with an anticipated growth of around 0.5-1% on a quarter-on-quarter basis. This brings the total revenue forecast for Q3 to a range of ₹2.33-2.37 lakh crore. Compared to the previous quarter (Q2FY25), where revenue stood at ₹2.35 lakh crore, this marks a modest increase. Year-on-year, analysts predict a 3-5% growth, which is an improvement from ₹2.27 lakh crore in Q3FY24.

The steady growth in revenue can be attributed to a combination of factors. The company’s oil-to-chemicals (O2C) business is expected to continue benefitting from strong refining margins, while higher average revenue per user (ARPU) in the telecom business, driven by tariff hikes in both prepaid and postpaid plans, is likely to give a boost to overall performance.

Net Profit Projection:

Net profit for Reliance Industries is expected to grow by 5-8% sequentially, reaching a range of ₹17,300-17,900 crore. While this shows positive growth on a quarter-on-quarter basis, it may still be lower than the ₹19,641 crore reported in Q3FY24, due to the relatively higher base from the previous year.

In the previous quarter (Q2FY25), Reliance posted a net profit of ₹16,563 crore. Analysts are closely monitoring the performance of the company’s key segments, especially refining and telecom, which are likely to drive this sequential growth in net profit.

EBITDA Estimate:

Reliance’s consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is projected to rise by 5-7% year-on-year, reaching a range of ₹40,200-40,500 crore. This growth is expected to come primarily from its refining and telecom segments, which are benefiting from favorable market conditions. The oil-to-chemicals business is expected to be a key contributor, with refining margins continuing to drive profitability.

Key Drivers for Growth:

Reliance Industries continues to be a diversified business conglomerate with strong performance across oil refining, telecom, and retail. In Q3FY25, experts expect these sectors to play a crucial role in driving the company’s growth:

1. Oil-to-Chemicals (O2C) Business: Refining margins are expected to remain strong, driving substantial growth in this segment. The oil-to-chemicals business has been a major contributor to Reliance’s profitability, and this trend is likely to continue in Q3.
2. Telecom Segment: With the price hikes in both prepaid and postpaid plans in Q2FY25, ARPU (Average Revenue Per User) is expected to rise, supporting revenue growth in the telecom business. Reliance Jio, the company’s telecom arm, has been a major player in India’s telecom industry and is likely to maintain its upward trajectory in terms of both subscriber base and revenue.
3. Retail Business: While specific numbers for the retail segment are not available, the retail business is expected to continue its strong performance, with its extensive footprint and diversification into e-commerce, groceries, and luxury products.

Market Reactions and Stock Movement:

Ahead of the Q3 earnings announcement, Reliance Industries’ share price traded at ₹1,255 at 9:20 am on January 16, up by 0.23%. This increase in stock price signals positive sentiment in the market, with investors anticipating strong results. However, the stock has gained over 3.3% this month, but it is still down 5.96% for 2024, underperforming the NIFTY50 index, which has risen 8.8% during the same period.

Technical View:

Reliance Industries has faced some challenges in recent months. It has slipped over 22% from its all-time high reached in July 2024. At present, the stock is hovering near a crucial support zone of ₹1,200, which aligns with the 200-weekly exponential moving average (EMA). This support level is being closely watched by traders and investors alike.

On the other hand, the stock is currently trading near a 50-day EMA resistance level. A breakout beyond this level, either up or down, could provide significant directional clues for the stock’s future movement.

Options Market Activity and Strategy:

Looking ahead, investors are turning to the options market to assess the potential movement in Reliance Industries’ stock price post-earnings release. Based on open interest (OI) data, as of January 15, analysts expect a price movement of ±3.8% around the current at-the-money strike of ₹1,250.

Options Build-Up:

• The highest call open interest (OI) for the 30 January expiry is at the ₹3,000 strike, indicating resistance at this level. This suggests that traders are betting on the stock encountering difficulty in moving past this price.
• Conversely, the highest put OI is at the ₹1,200 strike, implying strong support at this level. If Reliance shares dip below ₹1,200, the stock could face considerable selling pressure.

Options Strategy Recommendations:

Given the potential price movement of ±3.8%, traders may consider the following options strategies:

1. Long Straddle:
   • The Long Straddle strategy involves buying both an at-the-money (ATM) call and put option with the same strike price and expiry.
   • This strategy is designed to capitalize on a significant move in either direction, betting on more than a ±3.8% price movement. This strategy is suitable for traders expecting a sharp price move post-earnings.
2. Short Straddle:
   • The Short Straddle strategy involves selling both an ATM call and put option with the same strike price and expiry.
   • This approach is ideal if a trader expects low volatility and believes that Reliance’s stock will stay within a ±3.8% range after earnings. By selling both options, traders can potentially profit from time decay and a lack of significant price movement.

Historical Earnings Price Movements:

Traders can also review historical earnings data to assess how Reliance Industries’ stock has moved around earnings announcements in the past six quarters. Analyzing past performance can offer insights into potential market reactions based on various fundamental factors.

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Final Thoughts:

Reliance Industries is expected to post strong results for Q3 FY25, with growth driven by its telecom and refining businesses. While revenue and profit growth seem promising, the key areas of focus for investors will be the performance of these core segments and the company’s commentary on future business outlooks.

For those involved in the stock market, particularly options traders, understanding the potential price movement and employing strategies like Long Straddles or Short Straddles can be crucial for capitalizing on the volatility that typically accompanies earnings reports.

As always, trading in derivatives carries risks, and only experienced traders should engage in such strategies, with appropriate risk management practices in place.

Stay tuned for Reliance’s official earnings report later today, and ensure your strategies align with market expectations to navigate the post-earnings price movement effectively!

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Disclaimer:
The strategies and analysis provided in this blog post are for educational purposes only. Please conduct your own research or consult with a certified financial advisor before making any investment decisions. Derivatives trading involves significant risk and should only be done with full understanding and application of risk management techniques.