Reliance Industries up for the fourth straight trading day

Reliance Industries (RIL) was up 1.9% at Rs 1,415, trading higher for the fourth straight trading sessions on the BSE.

Since Jun 14, in past four trading days, the stock has outperformed the market by gaining 8% as compared to 0.33% rise in the S&P BSE Sensex.

RIL and BP on Thursday, June 15 announced investment of capex of Rs 40,000 crore (US$6 billion) in KG-D6 over the next 5-7 years, targeting 30- 35mmsmcmd of gas production; and a strategic partnership in downstream marketing across conventional, unconventional, and renewable fuels; however the company has not provided details of the tie-up.

Sharekhan, the brokerage firm believes that the vision to invest Rs 40,000 crore to ramp up production from KG basin fields is a step in right direction though the benefits of the same would be visible by FY2020 in RIL’s financial performance.

Thus, in the immediate term, the progress of Reliance Jio business along with the spreads in core petrochemical/refining business will be key drivers for the stock performance. We retain our Buy rating on the stock and target price of Rs 1,550, it added.

“We view the recent announcements positively; however, we await further details to understand the implication on earnings and valuation. Outlook for RIL’s core business remains strong, and we expect standalone EPS to grow at 12% pa through FY17-19ii,” analysts at IIFL Institutional Equities said in event update with target price of Rs 1,475.

However, factoring in losses at JIO, consolidated earnings would remain flat through FY19ii. RIL trades close to fair value in the base case. However, valuations could swing to >US$100bn market cap in case JIO is able to achieve 50% market share and Ebitda guidance by 2021, added report.

Daljeet S. Kohli, Head of Research, IndiaNivesh Research believe this announcement to be sentimentally positive in near term for RIL, as numbers will flow through only in 2020?2021.

“We remain positive on RIL and expect the earnings growth trigger to play out in RIL in FY18, when pieces of its large core projects get commissioned,” the brokerage firm said in recent report, maintain ‘buy’ rating with target price of Rs 1,659.

At 11:06 am; the stock of RIL was trading 1.6% higher at Rs 1,410, as compared to 0.48% rise in the Sensex. A combined 1.68 million shares changed hands on the counter on the BSE and NSE so far. It trading close to its 52-week high of Rs 1,465 touched on April 25, 2017 in intra-day trade.