Shares of Reliance Industries (RIL) fell 3.15 percent on Thursday after Morgan Stanley downgraded the company's rating citing headwinds in the energy business. The brokerage cut RIL's rating to 'equal-weight' and revised the target price to Rs 1,349 per share from Rs 1,230 earlier. At 11:07 AM, the stock was trading at Rs 1,270.10, down 2.26 percent on the NSE.
"The headwinds in the energy business are 1) rising premium on heavy & medium grade crude; 2) a rising global glut in PX/MEG (Paraxylene and monoethylene glycol) products; and 3) a glut in gas markets that lowers expectations from new petcoke gasifiers," the brokerage firm said in its research report.
"Implied energy business valuations at ~7.8x F21 EV/EBIDTA is richly valued and stands at ~10-12 percent premium to above historical averages and global peers. This is despite the headwinds to margin expectations and limited earnings growth," Morgan Stanley added.
Source: Morgan Stanley Research Report
However, the brokerage firm upgraded the price target considering the company's telecom business. "Commercial launch of broadband services, asset monetisation, newsflow on energy and telecom business above our base case valuations, and clarity on next leg of investments could act as positive triggers and drive upside risks to current rich valuations," it said.
Furthermore, the stock has slipped 10 percent in the last three trading sessions, and has lost nearly Rs 88,000 crore market capitalisation in just four trading sessions.
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