Reliance Industries rallies 7% in two days, stock nears record high

RIL traded 3.5 per cent higher at Rs 2,730 fairly close to its record high of Rs 2,750 touched on October 19, 2021.

Shares of Reliance Industries (RIL) were up 3.5 per cent at Rs 2,730 in Wednesday's intra-day trade, surging as much as 7 per cent in the last two trading sessions, on expectations of healthy earnings. The stock of the Mukesh Ambani-led refineries & marketing company is now close to its record high of Rs 2,750 touched on October 19, 2021.

RIL's consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) is estimated to grow 66.3 per cent year-on-year (YoY) to Rs 38,824 crore, mainly led by oil-to-chemical (O2C) and digital service segments. On a quarter-on-quarter (QoQ) basis, it is expected to grow 30.7 per cent led by O2C segment, ICICI Securities said in its result preview.

Growth in refining margins (partially offset by weaker petchem profitability) is expected to lead the growth of 64 per cent QoQ (and 94.5 per cent YoY) in O2C EBITDA to Rs 22,188 crore. E&P EBITDA is expected to improve 199.3 per cent YoY to Rs 1,437 crore on account of growth in realisation as well as output, the brokerage firm said.

Those at Elara Capital, meanwhile, said: RIL may witness 38 per cent YoY EBITDA growth in Q4 on strong gross refining margins (GRMs), Jio's earnings growth, and retail demand recovery. Q4FY22 GRM is likely to be $12.1/bbl versus an estimated $7/bbl in Q4FY21.

"Further, Jio may witness 22 per cent YoY EBITDA growth on 6 per cent ARPU increase. Retail's EBITDA may grow 23 per cent, led by Grocery and Consumer Electronics," the brokerage said. 

"Q4FY22 was a quarter of two halves as the first half saw significant margin pressure in chemicals with oil price spike and stable refinery margins. From mid Feb-22, tightness in the energy markets drove refinery margins to double by end March and chemical prices caughtup with higher oil prices, leading to above mid-cycle margins. Hence, we estimate a sombre 5 per cent QoQ rise in oil to chemicals EBITDA, but significant inflection is in works now", analysts at Morgan Stanley said in an update. The brokerage firm assumes $10.5/bbl GRM (up QoQ) but 10 per cent QoQ decline in chemicals EBIDTA/ton in Q4FY22.

That said, for most of 2022, Morgan Stanley believes the company will shift the spotlight back on the energy vertical with investor perception reversing as refining, chemicals and upstream gas lead the way for earnings and NAV upgrades. 

Technical View

Bias: Positive

Target: Rs 2,770

RIL has broken above the higher-end of the Bollinger Band on the daily charts in the intra-day trades. Sustained trade above Rs 2,703 can further aid the bullish sentiment at the counter. The weekly charts indicate trend line resistance around Rs 2,714, above which the stock can spurt to Rs 2,770.

The overall bias for the stock remains fairly positive on both the daily and the weekly charts basis due to positive price-to-moving averages action. The key momentum oscillators are also in the favour of the bulls.

However, in case of a steep correction, the stock is likely to find strong support around the 20-DMA which is currently around Rs 2,610-odd levels.

(With inputs from Rex Cano)