Why Reliance Industries stock hit all-time high in trade today
BusinessToday.In August 27, 2018
The Reliance Industries stock continued its upward momentum in trade today to hit an all-time high amid report its telecom venture Jio beat Vodafone India to become the second-largest telco by revenue market share, closing the gap with market leader Bharti Airtel on this front.
The Sensex heavyweight rose to a fresh record high of 1296 level, rising 1.40% compared to its previous close of 1278.05 level. At 12:36 pm, the stock was trading 1.15% or 15 points higher at 1292 level on the BSE. Its market capitalisation rose to Rs 8,19,458.12 crore.
Mayuresh Joshi, fund manager at Angel Broking said, "The stock has almost doubled in the period since the launch of the Reliance Jio business. The decision to sink over $20 billion into the telecom business has addressed the core issue of usage of cash. Petchem and refining were cash cows where most of the outlays have been completed. Reliance needed a new business with disruptive potential and that is where Jio fits in. In addition RIL has managed to maintain petchem margins at record levels. The GRMs in refining are also at a healthy premium over the Singapore benchmark. Additionally the retail business is also showing traction. The fact is that Jio has managed to disrupt mobile telephony by making data the center of attention. In the process they have forced consolidation in the industry which will eventually drive customers to greater engagement. Going ahead a lot will depend on factors like pricing power? Price wars etc."
The stock had hit its 52-week low of 765 level on August 29, 2018.
The stock logged the third-highest turnover on the BSE with the value of stocks traded on the BSE rising to Rs 22.53 crore.
Rahul Sharma, senior technical research analyst at Equity99 said, "The primary reasons for rise are RIL's increased its stake in Genesis Colors Ltd by over 3% and Jio's big ramp-up in subscriber additions and doubling of EBIDTA leading JIO to overtook telecom giant Vodafone in terms of revenue, becoming second-largest telecom player in India in revenue terms. This was supported by many other factors such as excellent set of numbers in Q1FY19 results (up 56% YoY), cascading effect of launch of JioFiber connectivity and so on.
The stock has been historically undervalued. These recent developments have led the market to see stability in petro-chem business growth potential in telecom and retail, media and digital business. Today, RIL is India's most valued firm by market capitalization. The overall multiple is still on the lower side trading at P/E of around 22-23 on consolidated basis. Still Reliance as a group is a target of what we call as "Conglomerate Discount". Hence, these price levels are indeed sustainable and a further room for P/E to expand by 2-3 exists i.e. price levels of 1350-1400."
The stock has clocked 65% gains during the last one year and 40% rise since the beginning of this year.
The stock has been gaining for the last six days and has risen 7.22% during the period.
The firm last week became the first Indian company to cross the Rs 8 lakh crore market capitalisation mark, racing ahead of Tata Sons' crown jewel TCS by more than Rs 20,000 crore in valuation.
The market valuation of oil-to-telecom conglomerate crossed the $100-billion mark last month. A few days later, its m-cap surged past Rs 7 lakh crore, making it the second company after IT bellwether Tata Consultancy Services to achieve the coveted milestone. TCS had crossed the $100 billion milestone on April 23, 2018.
28 of 37 brokerages rate the stock "buy" or 'outperform', four "hold" and five "underperform" or "sell", according to analysts' recommendations tracked by Reuters.
Reliance Industries reported its highest ever quarterly net profit for the quarter ending June 2018 as bumper earnings from the retail business, improved profitability of telecom arm and near doubling of earnings from petrochemical business offset lower margins from oil refining business.
Consolidated net profit of Rs 9,459 crore, or Rs 16 per share, in April-June, was 17.9 per cent higher than Rs 8,021 crore, or Rs 13.5 a share, in the same period of previous fiscal, the oil-to-telecom conglomerate said in a statement. Revenue was up 56.5 per cent at Rs 141,699 crore.
Motilal Oswal gave a buy target on July 30, 2018 with an upside of 15% on the stock after the conglomerate's Q1 earnings announcement on July 27. "On FY20 basis, the stock trades at 11.9 times consolidated earnings per share of Rs 95 and EV/EBITDA of 8.2x. Our SOTP -based fair value stands at Rs 1,301 per share. Maintain Buy."
Edelweiss raised its target price from Rs 1,201 after Q1 earnings were announced.
With commissioning of mega core projects, we expect FCF to turnaround, RoE to rise and profit to double in 4 years. Successful execution of RJIO bolsters our confidence in the mega venture. At CMP, the stock trades at an undemanding 12x FY20E PER. We reiterate 'BUY/SO'with revised TP of Rs 1,457 (INR 1,201 earlier) among highest on the street.