Reliance Industries jumps 3% as Goldman Sachs sees 35% upside
The brokerage has retained a buy rating on RIL, but revised target price down by 2 per cent.
By ETMarkets.com | Updated:
Reuters
NEW DELHI: Shares of Reliance Industries climbed over 3 per cent in Thursday's trade after Goldman Sachs said investor concerns around the oil-to-telecom major's free cash flow and debt repayments are overdone.
Goldman Sachs sees 34 per cent upside in the stock from the prevailing level. Following the development, the scrip rose 3.03 per cent to Rs 1,185 on BSE.
The brokerage has retained a buy rating on RIL, but revised target price down by 2 per cent to Rs 1,550, partly to reflect the potential delay in Jio tariff hike due to the ongoing crisis on account of the Covid-19 outbreak.
Share of the fast-growing consumer businesses of Reliance will also reach about 50 per cent over the next financial year due to the company's ability to gain market share from highly-leveraged peers — both in the telecom and retail segments. Goldman does not see Reliance’s telecom business being affected by the coronavirus outbreak, as the business can see rise in data consumption with majority of the population remaining at home due to social distancing measures.
“We expect a rapid recovery for RIL’s earnings driven by 60 per cent Ebitda (earnings before interest taxes depreciation and amortisation) growth for the telecom business in FY21 on account of higher ARPU (average revenue per user), recovery in oil prices and refining margins as supply demand trends improve in 2HFY21 (October-March), and turnaround in the retail business once lockdown restrictions are lifted,” said Goldman Sachs.
The shares of the company closed 1.62 per cent higher at Rs 1168.70 on BSE.
Goldman Sachs sees 34 per cent upside in the stock from the prevailing level. Following the development, the scrip rose 3.03 per cent to Rs 1,185 on BSE.
The brokerage has retained a buy rating on RIL, but revised target price down by 2 per cent to Rs 1,550, partly to reflect the potential delay in Jio tariff hike due to the ongoing crisis on account of the Covid-19 outbreak.
Share of the fast-growing consumer businesses of Reliance will also reach about 50 per cent over the next financial year due to the company's ability to gain market share from highly-leveraged peers — both in the telecom and retail segments. Goldman does not see Reliance’s telecom business being affected by the coronavirus outbreak, as the business can see rise in data consumption with majority of the population remaining at home due to social distancing measures.
“We expect a rapid recovery for RIL’s earnings driven by 60 per cent Ebitda (earnings before interest taxes depreciation and amortisation) growth for the telecom business in FY21 on account of higher ARPU (average revenue per user), recovery in oil prices and refining margins as supply demand trends improve in 2HFY21 (October-March), and turnaround in the retail business once lockdown restrictions are lifted,” said Goldman Sachs.
The shares of the company closed 1.62 per cent higher at Rs 1168.70 on BSE.
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