Buy calls increase for RIL shares on the back of big-ticket announcements

Domestic brokerages have revised Reliance Industries’ (RIL’s) target price anticipating higher earnings. The revision comes on the back of the company’s big-ticket announcements in retail and telecom at its annual general meeting on Wednesday.
 

Elara Capital revised its rating to ‘accumulate’ from ‘buy’ and increased its target price 7 per cent to Rs 1,981. IDBI Capital, too, changed its rating, to ‘buy’ from ‘hold’, and increased target price 17 per cent to Rs 2,154. Motilal Oswal Securities and Centrum Broking have increased target price by around 9 per cent. The RIL stock remained flat at Rs 1,843.10 at the close of trading on Thursday. On Wednesday, the stock fell 3.7 per cent.

Chairman Mukesh Ambani’s announcement of a delay in Saudi Aramco’s investment disappointed the Street, but brokerages expect lower finance costs and higher contribution from retail and telecom to boost earnings and give heft to the stock price.

Ambani said the Aramco deal had not progressed according to the timeline because of unforeseen circumstances and Covid-19.

Analysts are raising RIL’s valuation expecting sales growth with the launch of JioMart and lower interest cost following the reduction in net debt to zero. “We are raising our Ebitda (earnings before interest, taxes, depreciation, and amortisation) estimates upwards by 6 per cent and 7 per cent for FY21 (financial year 2020-21) and FY22 to factor in better refinery utilisation during lockdown and higher expected average revenue per user (in telecom),” IDBI Capital said in its note, while revising its target price.

BoFA Global Research increased FY22/23 earnings per share (EPS) estimate for RIL by 5 per cent and 2 per cent to factor in lower interest and slightly better ARPU at Jio, while increasing the target price by 5 per cent to Rs 2,040 and reiterating its ‘buy’ rating. However, not all brokerages are factoring in price growth. JPMorgan said the stock had rallied 127 per cent from the March lows against 47 per cent for the Nifty and that there is no near-term catalysts to drive the stock higher. Credit Suisse, too, continues to have a neutral rating on RIL.