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JP Morgan, Morgan Stanley bullish on this mega bluechip stock, see over 20% upside; should you buy?

JP Morgan, Morgan Stanley bullish on this mega bluechip stock, see over 20% upside; should you buy?

Both the global brokerage houses believe the bluechip stock will continue to outperform in the near future as well. On a year-to-date basis, the heavyweight stock has outpaced the benchmark NSE Nifty index by 21 per cent.

JP Morgan, Morgan Stanley bullish on this mega bluechip stock, see over 20% upside; should you buy? (Photo: Reuters) JP Morgan, Morgan Stanley bullish on this mega bluechip stock, see over 20% upside; should you buy? (Photo: Reuters)

Global brokerages are bullish on energy-to-telecom behemoth Reliance Industries with an upside of over 20 per cent. Take this: JP Morgan on June 15 revised the target price upward for energy-to-telecom behemoth Reliance Industries (RIL), citing a positive earnings revision cycle ahead on the back of strong refining and gas environment. The overseas firm believes that RIL may touch Rs 3,170 by June 2023 (earlier Rs 2,575 by December 2022).

On the other hand, Morgan Stanley last week retained a bullish view on RIL with a target price of Rs 3,253, indicating an upside of 26 per cent from the current market price. It believes that the company’s energy vertical is on track to deliver its best quarterly performance in more than 20 years.

“Refining margins are running almost 2 times above mid-cycle; petrochemical margins, despite China lockdowns, are up QoQ and trending towards mid-cycle; and upstream profitability is at its best ever,” Morgan Stanley said.

Meanwhile, shares of RIL traded 0.69 per cent down at Rs 2578.30 at around 1.47 pm (IST). On the other hand, the benchmark BSE Sensex traded 1.27 per cent lower at 51,873 at around the same time.

“Our upgrade to overweight is driven by a global view of strong refining environment though we build in a decline in product cracks from current levels and RIL’s non-energy business valuations continuing to hold up,” JP Morgan said in a report. However, it added that a fall in refining margins to January 2022 levels and a sharp decline in consumer business valuations are among the key risks.

It further believes that RIL's outperformance will continue. On a year-to-date basis, the heavyweight stock has outpaced the benchmark NSE Nifty index by 21 per cent.

JP Morgan further increased its FY23 and FY24 EPS estimates for RIL by 19 per cent and 17 per cent, respectively. “Our earnings estimates imply a sharp pullback in diesel and gasoline cracks from the current record level, but RIL remains among the best-positioned refiners globally due to its ability to buy and process arbitrage barrels, diesel heavy slate and focus on export. RIL’s upstream business should benefit from rising domestic gas prices and higher volumes,” the brokerage said.

It further added that RIL’s consumer valuations have held up well and with likely higher ARPU’s (average revenue per user) and further ramp-up of retail footprint, combined with renewables business optionality, the non-energy business valuations should hold up going forward even as consolidated reported earnings should improve materially from here on,” JP Morgan added.

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