Shares of Mukesh Ambani-led Reliance Industries Ltd (RIL) were in focus today after brokerage Jefferies assigned a target price of Rs 3,100 on the large cap stock. The target amounts to an upside of 13.45% to the previous close of Rs 2,732.40 on BSE. The RIL stock has been rising for the last six sessions and gained nearly 8% during the period. The index heavyweight closed at Rs 2,556.45 on November 23 and hit an intraday high of Rs 2,754.70 in the current session, translating into gain of 7.74% in six sessions.
However, the stock is in an overbought zone with a Relative Strength Index (RSI) of 71.9. A value below 30 indicates that a stock is oversold and a value above 70 signals that the scrip is overbought. The conglomerate’s stock has a price to equity ratio of 28.9, which is higher compared to the industry PE of 12.64. This signals that the stock is overvalued.
Meanwhile, a total of 1.55 lakh shares of the firm changed hands, amounting to a turnover of Rs 42.53 crore on the BSE. Market cap of Reliance Industries rose to Rs 18.58 lakh crore. Currently, RIL shares are trading 3.78% away from the 52 week high of Rs 2,855 reached on April 29, 2022. They hit a 52-week low of Rs 2,181 on March 8, 2022.
Jefferies cited likelihood of withdrawal of export duties on diesel and aviation fuel behind its bullish stance on RIL.
Despite moderation in Singapore GRM gross refining margins (GRMs), export duties on diesel and aviation fuel remain elevated, said the brokerage.
It expects the government to withdraw export duties with oil prices correcting over 30% since June end. Export duty on steel was withdrawn recently when rates fell 24% from the peak. The brokerage said Reliance’s FY24E EBITDA will get a 5% (US$ 1bn) boost if duties on diesel and aviation fuel are withdrawn.
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Abhijeet Bora, Assistant Vice President at Fundamental Research at Sharekhan expects the stock to reach Rs 3,050.
"The recent sharp rally of 6% in the stock of Reliance Industries can be attributed to expectations of removal of export duty on diesel/ATF, which could improve earnings outlook for its refining business. Additionally, recent launch of 5G services and target to expand on Pan-India basis by 2023 would be positive in drive ARPU improvement going forward. RIL is our top pick and we expect continued strong earnings traction in its consumer-centric business – Jio (likely further telecom tariff hike and ramp-up of home broadband) and retail (high growth in retail, led by market share gain and new commerce). Overall, we expect a 30% profit after tax CAGR over FY2022-FY2024E. Further, potential value unlocking in digital and retail (with a likely IPO for consumer business) will add value to shareholders’ return over the coming years. We have a Buy call on RIL SoTP-based price target (PT) of Rs 3,050," said Bora.
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Abhijeet from Tips2trade said, "Strong rally due to launch of 5G services & a global market recovery has led to an increase in Reliance Industries stock. Technically, the stock is overbought and faces stiff resistance at 2790. Investors should book profits at current levels and wait for a dip near 2600-2610 to buy for targets of 2840-2990 in the coming months."
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Commenting on the technical aspect of the stock, Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking said, "The stock has retraced its preceding five months' corrective phase in a faster time, indicating an end of correction and resumption of the primary uptrend. The stock has registered a breakout above the bullish Inverted Head & Shoulder-like formation, signaling the resumption of an upmove and offering a fresh entry opportunity. The breakout is supported by strong volumes, underlining larger participation at the breakout area. The stock has recently rebounded, taking support at the 20 days EMA (currently at 2617 levels) as well, further reaffirming the overall positive bias. To add further, on the larger time frame, the stock has been on the upward trajectory trading amid the rising channel since September 20 onward. Hence, one can expect the stock to head towards the upper panel of the pattern at around Rs 3200 in a medium-to-long term perspective."
Vinit Bolinjkar, Head of Research, Ventura Securities said, "The government may withdraw export duties on diesel (Rs 10.5 per ltr) and aviation fuel (Rs 5 per ltr) which will remove the overhang on RIL. The telecom industry subscriber mix continues to improve. High-end customers are moving towards the 5G and their data usage is set to increase. The industry's subscriber base has remained stable despite price hikes. 5G subscriptions in India are expected to reach around 31 mn by the end of FY23, as telecom providers continue to roll out 5G services. Telecom companies dial the govt asking OTT players and apps to pay a usage charge and argue that the telecom companies creating the infrastructure are entitled to claim charges from those using it for commercial gains. The company's O2C capex is over and the business could generate significant cash flow in the coming years. This cash will be utilized to fund the ambitious capex plan of Rs 75,000 to 80,000 crore. The RIL stock is currently trading at FY25 EV/EBITDA of 11.8x, which is a reasonable valuation for a growing company with a net debt zero balance sheet."
Manoj Dalmia, founder and director, Proficient Equities said, "Likelihood of withdrawal of export duties on diesel and aviation fuel behind its bullish stance on Reliance. We may expect some retracement in the stock on the upside. A target of Rs 2,858 can be fixed."
Ravi Singh, Vice President and head of research, Share India said,"RIL shares gained after Government of India (GoI) further reduced the windfall tax on exports of locally produced oil and diesel. This is expected to boost oil refining margins of the oil producing companies that are in oil export business. So, RIL stock is expected to remain in focus. The counter may touch the levels of 2900 on this momentum in medium term."
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