Reliance Industries hits two-month high

Reliance Industries (RIL) hit a two-month high of Rs 1,084, up 1.8% in intra-day trade on Friday, extending its Thursday’s 1% gain on the BSE after the company said it commissioned the first phase of Para-xylene (PX) plant at Jamnagar, Gujarat.

The stock was trading at its highest level since October 21, 2016. It hit a 52-week high of Rs 1,129 on September 26, 2016 in intra-day trade.

Thus far in December, the stock has outperformed the market by gaining 9% as compared to 0.22% fall in the S&P BSE Sensex. Since November 8, post demonetization, it was up 8% against 3.6% decline in the benchmark index.

The company said that with the commissioning of this plant, RIL’s PX capacity will more than double from 2.0 million metric tonnes per annum (MMTPA) to 4.2 MMTPA. On commissioning of entire PX capacity, Reliance will be the world’s second largest PX producer with 9% of global PX capacity and 11% share of global production.

The new PX capacity will add value to the output from refineries and improve the profitability of the Jamnagar complex. The new capacity will complete the integration within Reliance’s polyester value chain, leading to improved margins and also strengthen its position in polyester industry globally, it added.

“The commissioning of key projects this year would fuel RIL’s earnings in FY18. We expect earnings before interest, taxes, depreciation, and amortization (EBITDA) gains of around US$ 3 billion over FY18-FY19 from the current PX expansion and also from refinery off-gas cracker (ROGC) and petcoke gasification projects by H1FY18,” analysts at Religare Institutional Research said in a report.

RIL’s US$ 22 billion investment in RJio (>25% of balance sheet) over the last six years has hobbled stock performance. But considering the 30% CAGR in core earnings (ex-RJio) and US$ 20 billion in cash flows expected over FY17-FY19, the telecom arm would be less of a concern three years on, added report.

Reliance Industries Limited (RIL)