Brokerage firm Nomura Financial Advisory and Securities India has upgraded the shares of Reliance Industries to ‘buy’ from ‘neutral’ following a sharp correction in the scrip on July 1.
Nomura termed the 7 percent decline in the stock following the imposition of a special additional excise duty by the government on petrol and diesel exports as ‘overdone’.
Windfall taxes could potentially impact RIL’s gross refining margins by $12 per barrel, which translates to a hit of Rs 47,000 crore on an annualised basis, to Nomura India’s estimates, the brokerage house said.
“But, with the continued strength in transportation cracks and sharp increase in discounted Russian crude in RIL’s mix, we think RIL will continue to report high GRMs in the near term,” it said.
Nomura said that Singapore refining benchmark was at $21 per barrel for the June quarter, which is ahead of its estimate of $16 per barrel in refining margins for 2022-23. “In this context, we think the correction in RIL’s share price on July 1 was excessive at nearly 42 percent of our ascribed valuation to RIL’s refining segment.”
Nomura India has raised its 2022-23 operating profit estimate for RIL by 1 percent to account for higher gross refining margins, lower spectrum usage charge and currency depreciation benefit that are offset by lower average revenue per user for the telecom business.
The brokerage has also lowered its enterprise value-to-operating profit multiple for the stock to seven times from eight times earlier, which has resulted in a minor cut to price target to Rs 2,800 from Rs 2,850 earlier.At 2:38pm, the shares of Reliance Industries were down 0.2 percent at Rs 2,404.8 on the National Stock Exchange.
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