15 RELIANCE share price target reports by brokerages below. See what is analyst's view on RELIANCE share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
Petrochem margins are likely to be weak in light of continued US-China trade concerns, the weak economic outlook and the strong additional supply globally over the next 2-3 years (RIL expects the petchem market to balance out by 2021-22). Polymer production was up 3% YoY, led by optimized operations of ROGC complex. Domestic polymer demand is likely to be healthy, driven by policy push and budgetary allocation for the infrastructure/agri sectors. We value RIL using SOTP. We value the core segment of Refining and Petrochem at 7.5x FY22E EV/EBITDA, factoring in the enhanced delayed coker capacity, the widening of crude blend window for maximizing distillate yields prior to IMO and the revival in Petchem margins for the company under its flexible feedstock utilization. Our DCF-based target price for RJio of INR500 ascribes 11% WACC and 3% terminal growth, with implied EV/EBITDA of 13/10x on FY21/22E. The rich valuation is justified by RJio’s strong leadership position in three years of commercial launch. While net debt including fiber assets is ascribed at INR2048b for FY21, management indicated that fiber asset sale would be announced soon, which could reduce debt by INR460b. Reliance Retail: We expect a CAGR (FY19-22) of 29% in revenue to INR2,828b and 36%/42% in EBITDA/core EBITDA to INR155b/INR147b. We value it on an FY22 SOTP basis to arrive at a target price of INR500/share. The stock trades at 15x FY21E EPS of INR105.2 and 9.8x FY21E EV/EBIDTA. We reiterate our Buy rating on the company with a revised TP of INR1,820.
Retail earnings- growth continues unabated: The retail profitability continues remain strong as the company opens new stores and operating leverage plays out. For Q3, 456 new stores were opened and retail EBIDTA improved to Rs27bn (Rs23bn in Q2). 9MFY20 EBIDTA improved to Rs70.9bn (+66%YoY). Cut earnings, maintain BUY: We cut our estimates for FY20/21E to factor in lower refining margins by USD1/bbl for FY20/21 to USD9.5/10.5 and lower petchem profitability. Our revised PT stands at Rs1,705 (1,793 earlier).
Reliance JIO has launched ‘All-in-One Plans’ with higher tariffs following hikes by Vodafone and Airtel. After three years of severe tariff war, price hikes are welcome and we expect further hikes going forward. We increase RJIO’s ARPU assumptions for FY21-22E to Rs 170 /180 vis-à-vis FY20 rate of Rs130. We also revise RJIO equity value to Rs799/sh as we ascribe higher multiple of 8.0x EV/E FY22E and to factor in recent proposed reorganization of its digital platform to transfer Rs1.08trn debt/liabilities to RIL. We upgrade RIL to BUY with a PT of Rs1,793 (Rs 1,395 earlier) as we incorporate higher value of JIO and also incorporate higher value on RIL retail at Rs439 (Rs316 earlier on roll over to FY22E).
Reliance Industries (RIL) continued to deliver steady earnings with Q1FY20 consolidated PAT at INR101bn beating estimate by 2.3%. EBITDA at INR208bn (adjusted for gains from Ind-AS 116: INR4.8bn) was broadly in line with estimate. Key highlights: 1) RIL has announced that the INR252bn investment by Brookfield in the tower InvIT will be used primarily for repayment of existing debt; 2) it has expanded coker capacity to leverage IMO, enabling it to convert HSFO in to gasoil; 3) refining in Q1FY20 delivered a solid beat on EBITDA (6% above estimate) despite lower GRM (GRM: USD8.1/bbl, estimate: 8.3/bbl) due to surge in refinery utilization; 4) petchem beat estimate 5% due to ramp up of cheaper ethane imports replacing costlier naptha and propane; and 5) RJIO’s earnings came in line while capex continues to remain elevated accounting for bulk of the INR220bn invested during the quarter. With no clarity on start of petcoke gasifier, we revise down refining and petchem earnings (lower polymer margins) leading to 4.5% cut in FY20E EPS for RIL and 3% cut in TP to INR1,652/share (INR1701 earlier). Maintain ‘BUY’.
Cut earnings, maintain Hold: We cut our estimates for FY20/21E by 10%/9% respectively to factor in lower GRMs. Our PT cut is cushioned by increased in value of retail to Rs132 (Rs117 earlier). We maintain our rating to ACCUMULATE.
Valuations We value the company using SOTP valuation, thereby, valuing refining & petchem business at 7.0x FY21E EBITDA & telecom at 7.0x FY21E EBIDTA to arrive at a target price of INR 1638/share indicating 18.2% upside. We strongly recommend to add the stock on dips with an investment horizon of 1 year.
We upgrade RIL to BUY after the 4QFY19 beat. We believe RIL will be the biggest beneficiary of the IMO regulations, as it is the most complex refiner globally. Hiving off R-Jio’s optical fiber and tower assets will unlock value by reducing attributable consolidated debt.RIL is creating value via (1) Transition from a low-multiple refining business to the consumer-oriented, digitally fired R-Jio, (2) Monetisation and deleveraging achieved by hiving off fiber and tower assets, (3) GRMs rising post the new IMO regulations (est. USD 9.2-12.0/bbl over FY19- 21E). Our SoTP is Rs 1,535/sh (7.5x EV/e for refining, 9x EV/e for petchem, Rs 6.0/sh for domestic E&P, 1x EV/capital for Shale, 25x EV/e for Retail and 10x EV/e for Telecom).
Maintain Buy rating with revised PT of Rs. 1,630: We have fine tuned our FY2020E EPS and FY2021E EPS to factor in higher subscriber additions, higher earnings for retail business and lower refining margins. We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 1,630 as we ascribe higher value to the telecom and retail business backed by higher multiple and upward revision in earnings estimates for the segments. We believe that deleveraging of consolidated balance sheet with transfer of telecom infrastructure to infrastructure investment trusts and potential stake sale in downstream business (as per media reports) along with continued high growth in retail and telecom businesses would remain a key re-rating catalyst for the stock in near to medium term. At CMP, the stock is trading at 16.8x its FY2020E EPS and 15.2x its FY2021E EPS.
Ourreport‘Weaknessaheadinrefiningandpetrochem’(releasedon2nd Apr’19) echoes with management’s guidance of expanding supply glut in both refining and petrochem in 1-2 years, which would keep the core sector performance under pressure. CapexintensityremainshighwithtotalinvestmentofINR327bin4QFY19 and INR1,345b in FY19 (+70% YoY). There is no specific guidance on capex. However, the petcoke gasifiers appear to have been commissioned fully, which should decrease capex, at least in the standalone business.
We estimate RIL’s EBITDA to clock a robust 19% CAGR over FY19-23 driven by 14% CAGR for refining and 40% and 29% for retail and telecom, respectively, off a low base. Hence, we revise our TP to INR1,636 (INR1,435 earlier; based on SOTP). We reiterate ‘BUY/SO’. At CMP, the stock is trading at 7.0x FY21E EV/EBITDA.
Global refining and petrochem peers are trading at ~6x FY20 EV/EBITDA. We value RIL’s refining and petrochemical segments at 7.5x – the premium here reflects the company’s superior capability to manage the crude basket, refinery yields, hedging and multiple feedstock for its petrochem segment. We value RIL using SOTP. We use 7.5x EV/EBITDA for refining/petrochem, DCF for E&P, 2.5x EV/sales for Reliance Retail and DCF for RJio. We roll over our valuation to FY21. With a revised TP of INR1,457, we downgrade our rating to Neutral due to limited upside in the stock.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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