RIL jumps 6% post Monday rout as oil prices rise, Macquarie upgrades

Reliance Industries (RIL), the oil-to-telecom behemoth, surged around 6 per cent to Rs 1,178.40 apiece on the BSE on Wednesday after global brokerage firm Macquarie upgraded the stock to 'Neutral'. Moreover, oil prices continued to rise for the second straight day, lifted by hopes that US producers will cut output.

RIL had hit a 52-week low of Rs 1,094.95 on Monday (March 9) owing to crash in crude oil prices after Saudi Arabia and Russia triggered a price war.

At 09:34 am, shares of the company were trading 4.8 per cent higher at Rs 1,166.50 on the BSE. In comparison, the S&P BSE Sensex was trading 162 points or around half a per cent higher at 35,798 levels.

Macquarie has set the target price of Rs 1,145 per share. The brokerage, in its note, wrote that it has removed Aramco premium worth Rs 140 per share from its Sum-of-the-parts (SOTP) valuation.

In its annual general meeting (AGM) held in August 2019, RIL had announced that it had signed a letter of intent with Saudi Aramco for a proposed investment in the company's oil-to-chemical division. The deal was expected to fetch $15 billion (~1.06 trillion) for a 20 per cent stake.

The brokerage said it continues to see consensus earnings downgrade risk for RIL. However, it noted that at current price, the company's balance of risk has turned positive.

Another global brokerage Goldman Sachs believes that the correction in the stock is overdone. It has maintained 'BUY' rating on the stock with the target price of Rs 1,750 per share. It noted that valuation of energy segment has halved in the current sell-off and consumer businesses are expected to drive earnings before interest, tax, depreciation, and amortisation (EBITDA) growth of the company.

So far in the calendar year 2020, shares of RIL have underperformed the market by falling over 26 per cent against around 14 per cent decline in the Nifty50 index (as of Monday's close).

Reliance Industries Limited (RIL)