India’s most valued company Reliance Industries still a buy at all-time high levels: CLSA

The rate cut by India’s telecom regulator TRAI has led global research and brokerage firms such as CLSA, Goldman Sachs and Bank of America cheering for Reliance Industries, even as the stock trades at all-time high levels. Reliance Industries enjoys the status of being India’s most valued company as the conglomerate commands a market capitalisation greater than Rs 5,54,000 crore, nearly Rs 75,000 crore more than India’s second in command TCS.

The shares of Reliance Industries hit an all-time high of Rs 864.7 in early trade this morning, registering a gain of more than 3.4% since previous close. The share have returned more than 54% since January. CLSA has maintained a buy call on the stock with a target price of Rs 1,050. Its earlier target was Rs 990. The Hong-Kong based firm has raised in the consolidated EPS forecast by 8% on the back of TRAI rate cut. Goldman Sachs has revised its estimates upwards for the shares of India’s most valued company to Rs 905 from earlier Rs 875, as the research firm sees $250-400 million increase in EBITDA for Reliance Jio after the IUC cut.

This move will also hit Reliance Jio’s competitors Idea and Airtel. Goldman Sachs estimates that Bharti Airtel’s cash flows will reduce by more than $150 million due to the rate cut. In a statement by the company this morning, Bharti Airtel said, “We are extremely disappointed with the latest regulation on the IUC, especially at a time when the industry is facing severe financial stress. The suggested IUC rate, which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favor. ”

Bank of America Merrill Lynch has estimated that Bharti Airtel’s consolidated EBITDA will be lower by 2-5% till Financial Year 2021. According to the global firm’s estimates, IUC contributes to 10-15% of EBITDA of the company. Bharti Airtel shares plunged by more than 4% on the news and hit the day’s low at Rs 371. The shares have shed more than 6% in the last one month. Goldman Sachs estimates that the IUC cut will cause a heavy $250 million dent to the annual cash flows of Idea Cellular. As per Bank of America Merrill Lynch’s estimates, IUC contributes to 10-15% of EBITDA of the company. The shares were trading at Rs 79.6, down by more than 4.33%.

Reliance Industries Limited (RIL)