RIL Cracks Close To 8% After Q2 Results: Should You Hold, Buy Or Sell It?

Even as the oil to telecom conglomerate Reliance Industries (RIL) managed to deliver Q2FY21 earnings better than street estimates owing to sharp recovery in demand across all its business verticals, particularly telecom and retail, it shed close to 8 percent in share price in Monday's (November 2, 2020) deal to Rs. 1897 per share on the BSE.

For the September quarter, Mukesh Ambani led firm has reported a 15% year-on-year decline in net profits to Rs.9567 crore.

Below are detailed brokerages recommendations on the RIL stock

Brokerages and analysts offer a divided view on the outlook for Reliance Industries. While most have held on to the bullish recommendation on the stock, research firm Macquarie has maintained an 'underperform' rating on the stock with a target price of Rs. 1195 per share, which is a sharp 42 percent correction from the stock's closing price on Friday of Rs. 2054.

The investment firm largely remains cautious on RIL as it sees no economic moat while noting that the company posted sequential rebound in the quarter ending September on expected lines.

CLSA:

On the RIL counter, CLSA has maintained an ‘outperform' call with a target price of Rs. 2250. The brokerage has slashed its FY22-23 EPS guidance by 4 percent and said the "RIL has possibly exhausted its large near-term inorganic triggers. The stock is already baking in deal valuation."

The miss on refining was more than offset by a beat in petchem. The core PBT missed by 32% due to higher interest expenses, noted the research firm. EBITDA at Jio came in as per estimates even as the firm missed on parameters including ARPU and subscriber base. Further, the retail segment stood strong on account of cost-control measures at the firm.

The reduction in net debt was lower than our estimate. The using recent deals as a benchmark gives us a value close to its CMP, said CLSA.

Edelweiss Securities:

The company has maintained a ‘hold' recommendation on the stock with a target price of Rs. 2105. Edelweiss observes that the primary stock triggers including asset monetization, digital momentum and deleveraging have played out for the company.

Motilal Oswal:

Motilal Oswal has maintained ‘Buy' recommendation' on the stock with a target price of Rs. 2240 per share. By employing the SOTP method, the brokerage firm values the conglomerate's refining and petrochemical segment at 7.5x for arriving at a valuation of Rs. 713/share for standalone. Further to its RJio and Reliance Retail segments, Motilal Oswal assigns a valuation of Rs. 900 per share and Rs. 627 per share, respectively.

Conclusion:

After raking in huge sums from foreign investors into Jio Platforms, the firm is treading a similar path for its retail division. Further the behemoth's digital engagement across verticals including retail is highly encouraging. Nonetheless, even as brokerages look for fresh triggers from the company's retail and Jio division, the near term upside in the stock seems limited though the counter paints a promising growth story in the long term.

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