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Jefferies keeps 'buy' tag on Reliance shares with 16% upside potential, earnings upgrade

According to Jefferies, multi year-low inventories, declining Russian exports, muted Chinese exports, lower diesel production in Europe and delays in commissioning of ME refineries are tailwinds to refining margins in CY22.

June 22, 2022 / 10:17 AM IST
Reliance Industries, RIL stock

Reliance Industries, RIL stock

 
 
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Reliance Industries share price was trading in the red on June 22 amid weak market conditions. The stock has remained subdued having returned only 13 percent in the last one year.

At 9:44am, the stock was trading at Rs 2,539.05, down Rs 45.05, or 1.74 percent. It touched an intraday high of Rs 2,558.30 and an intraday low of Rs 2,537.80.

Global research and broking firm Jefferies has retained buy rating on the stock with target at Rs 2,950 per share, an upside of 16 percent from current market price. The research firm believes that the correction in the stock offers opportunity adding that there are tailwinds to refining margin in CY22.

According to Jefferies', multi-year low inventories, declining Russian exports, muted Chinese exports, lower diesel production in Europe and delays in commissioning of ME refineries are tailwinds to refining margins in CY22.

"Reliance Industries is a key beneficiary of energy inflation, with every $1 per barrel improvement in annualised refining margins, adding an estimated $400-450 million to RIL's consolidated EBITDA. Our initial estimates suggest RIL's oil-to-chemical business EBITDA could rise 60 percent on quarter in Q1 this year and account for 35 percent of our FY23 estimate. Continued strength in refining should result in consensus FY23 earnings upgrades," it said.

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The stock has corrected 10 percent from its recent peak. "We reiterate buy with Rs 2,950 as the target price," it added.

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JP Morgan had earlier upgraded its rating on Reliance to overweight from neutral and raised the target to Rs 3,170 from Rs 2,575 per share, implying an upside of more than 24 percent over the next 12 months. It said that its rating upgrade is driven by improvement in earnings outlook of the refining and upstream gas business as well as the consumer technology businesses’ valuations holding.

JP Morgan believes the firm's outperformance to Nifty50 will continue in 2022 given that there is a good chance of upgrades to Street’s earnings expectations for the company. The brokerage has raised its earnings per share estimate by 19 percent for 2022-23 and 17 percent for 2023-24.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​
Moneycontrol News
first published: Jun 22, 2022 10:15 am
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