Buy Reliance Industries, target Rs 1,040: Sharekhan

Sharekhan has a buy call on Reliance Industries with a target price of Rs 1,040.

The current market price of Reliance Industries is Rs 927.

Time period given by the brokerage firm is 'Long Term' when Reliance Industries price can reach defined target.

Sharekhan has revised its FY2018 and FY2019 earnings estimates to factor higher profitability for the telecom business and have introduced our FY2020E EPS of Rs 73.50.

Sharekhan has also increased its price target (PT) to Rs 1,040, as it assigns higher value to the telecom business (valued at 7.5x FY2020E EV/EBITDA, which is at nearly 10 per cent discount to Sharekhan's target EV/EBITDA multiple for Bharti Airtel) and retail business (valued at 25x FY2020E EV/EBITDA).

Sharekhan maintains its Buy rating on RIL as it retains its positive view on core refining and petrochemical margins; and value accretion from the telecom business (led by likely improvement in the financials) would be a key rating trigger for the stock going forward.

Key downside risks to Sharekhan's rating and PT are lower-than-expected refining and petchem margins and disappointment from the telecom business.