Homemarket Newsstocks News

Reliance Industries: Despite richer valuations, stock to outperform, says Nomura; raises TP to Rs 2,200

Reliance Industries: Despite richer valuations, stock to outperform, says Nomura; raises TP to Rs 2,200

Reliance Industries: Despite richer valuations, stock to outperform, says Nomura; raises TP to Rs 2,200
Profile image

By Mousumi Paul  Jul 17, 2020 5:50:52 PM IST (Updated)

For the sixth consecutive year, the oil-to-telecom-to-retail conglomerate has outperformed the benchmark Nifty50 index.

Reliance Industries is the only Indian company in history to have raised about Rs 2.12 lakh crore by selling a 33 percent stake in Jio Platforms and a rights issue, which has made it virtually a net-debt free company. For the sixth consecutive year, the oil-to-telecom-to-retail conglomerate has outperformed the benchmark Nifty50 index.

Recommended Articles

View All

Global brokerage Nomura in its report said that while the valuations of the RIL stock are getting richer, it feels that the outperformance may sustain and hence, raised the target price on the stock to Rs 2,200 from an earlier TP of Rs 1,900 per share.
"RIL is now outperforming the benchmark Nifty for the sixth year. From the lows in March, RIL is up 110 percent (v/s Nifty +41 percent). From end-2014, when this cycle began, RIL is up 4.1x (v/s the Nifty’s rise of 30 percent)," said the global brokerage.
Over the last three years, RIL’s stock performance has been outstanding: in
2017/18/19, the stock was up 70 /22/38 percent, v/s the Nifty's rise of 19/3/12 percent, added the report.
RIL v/s Nifty Source: Nomura Report
Despite a subdued FY21, expect 29 percent CAGR in consolidated earnings over FY20-23F, said the brokerage.
Also Read:
On the Saudi Aramco deal front, Nomura observed that while the proposed transaction to sell 20 percent stake in oil to chemicals (O2C) is delayed, RIL seems committed to a partnership with the Saudi Arabian oil giant.
The brokerage said that to facilitate the Saudi Aramco deal, RIL is planning to spin off the O2C into a separate subsidiary. It will further look to induct global partners/investors in its retail segment in the next few quarters, before eventually listing Retail/Jio through an IPO.
Source: Nomura Report
"We cut our FY21/22F earnings by 16 percent/9 percent due to prevailing weak refining/chemical margins, and also lower remaining stake in Jio (67 percent vs 90 percent earlier). We also roll forward our SOTP (sum of the parts) valuation to Sep-22F (from Mar-22F earlier). RIL is our preferred pick in India's oil & gas space," the report added.
Key risks include further deterioration in refining margins, weakness in petrochemical margins, sharper rupee appreciation v/s the USD, lower than expected Reliance Jio profitability and slowdown in Reliance Retail's growth, concluded the brokerage.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!