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RIL shares fall another 2%, time to buy, sell or hold the stock?

The overvalued stock of RIL, which has been rated 'Buy' almost by all brokerages is declining on profit booking. Analysts said a sell-off in Reliance Industries stock came as investors followed the principle of buy on expectations and sell on announcements

Rupa Burman Roy | Print Edition: July 26, 2020
RIL shares tank another 2%, time to buy, sell or hold the stock?
The RIL stock has risen 0.089% in one week and 21% since the beginning of the year 2020

Share price of Reliance Industries Ltd (RIL) was trading almost 2% lower in Thursday's trading session after hitting a record high yesterday.As per market analysts, RIL's share price fall happened after it was announced that the much-awaited RIL-Saudi Aramco will get delayed.

Furthermore, the overvalued stock which has been rated 'Buy' almost by all brokerages is declining on profit booking. Analysts said a sell-off in Reliance Industries stock came as investors followed the principle of buy on expectations and sell on announcements. The share price of RIL had moved up around 13% this month anticipating announcements at the AGM.

"Deal with Saudi Aramco hasn't progressed per the original timeline due to unforeseen situations in the energy market and COVID-19 situation. We value our two-decade relationship with Aramco and are committed to a long-term partnership," RIL Chairman Mukesh Ambani said in the AGM.

Expressing views on the RIL stock, Nirali Shah, Senior Research Analyst, Samco Securities said, "The stock price of Reliance has witnessed a decline towards the end of the AGM since most of the news was already priced in and there were not many surprises. Hence, it will see some correction to levels of 1750 in the short term but the long-term growth trend is still intact for this stock."

Reliance shares were trading 1.80% lower at Rs 1812.25, its day's low, after hitting a record high of Rs 1978.50 yesterday. The stock ended 3.71% lower at Rs 1,845 on Wednesday. In today's session, RIL stock opened at Rs 1,850.00 and later touched an intraday high of Rs 1,868.

In the current session, market cap of the firm stood at Rs 11.66 lakh crore. Reliance Industries stock price trades higher than 5, 20, 50, 100 and 200-day moving averages. The RIL stock has risen 0.089% in one week and 21% since the beginning of the year 2020.

On July 13, RIL became the first Indian firm to cross the market capitalisation of Rs 12 lakh crore. In June, Ambani announced RIL became debt-free months ahead of its March 31, 2021 target.

Religare Broking said, "With so much developments on the Jio platform mainly on the digital side as well as well-known strategic partners as investors, it has the potential to become a truly global company, offering solutions to clients worldwide. Going forward, RIL plans to strengthen and grow retail and O2C business are also an encouraging sign. On the financial side, it has a healthy balance sheet, net debt-free status, strong management and promising growth prospects across businesses. We remain positive on the company's long-term growth plans and would advise investors to hold the stock for healthy returns. Fresh investment in RIL to be made only on dips."  

IDBI Capital in its note said, "We have factored-in rights issues and stake sale of Jio in our model. We expect the company's EBITDA to grow -2.9%/+42.3% while PAT to grow by -17.3%/+65.6% in FY21/FY22, respectively."

"We are raising our EBITDA estimates upwards by 6% and 7% for FY21 and FY22 to factor in better refinery utilization during the lockdown and higher expected ARPU. We are revising our TP upwards to Rs2,154 and upgrading the stock to BUY from HOLD," the brokerage added later.

Credit Suisse in its Equity Research report said it has NEUTRAL stance on the RIL stock, with triggers on more clarity on new commerce initiative, and Aramco O2C deal.

It added, "We value Jio's wireless business at 8.5x EV/EBITDA and non-wireless at 12.5x EV/EBITDA (10x for home broadband/enterprise and 15x for others)." CS also lined key risks such as slow traction in Jio's non-wireless verticals, energy cycle stays weak, and positive surprise in new commerce retail with significant onboarding of kirana stores.

Axis Capital said," Total capital raise of Rs 2.13 trillion through rights issue, strategic/ financial investments in Jio and BP investment helped the company surpass zero net-debt target on reported debt basis (Rs 170 bn short of adj debt). Coming out of the capex cycle, RIL provides a unique combination of new and old economy with improving balance sheet health. BUY with SOTP-based TP of Rs 2,130."

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