RIL Shares Target Price Revised Higher: Brokerage See Up To 27% Upside In 1-Year

Shares of heavyweight stock Reliance Industries in line with the broader trade are down by over 1% in trade on June 16, 2022. Nevertheless, global brokerages have placed their optimism in the counter and have come up with fresh targets which signal of a potential upside of up to 27% from the current market price of Rs. 2563 per share.

Check RIL target price as set out by global brokerages

Brokerage	Target price
JP Morgan	Rs. 3170
Morgan Stanley	Rs. 3253

Rationale for bullishness in Reliance Industries

JP Morgan has raised the target price higher on the back of a strong earnings revision cycle taking into heed the robust refining environment. From the earlier target set out at Rs. 2575 by December 2022, the revision has been made to Rs. 3170 by June next year.

"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.

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.

On similar lines, Morgan Stanley is highly optimistic of the company's energy space and sees it to deliver the best performance in over 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.

Key risks to the stock as noted by brokerages

JP Morgan at the same time also cites the key risk and mentions that a fall in refining margins to January 2022 levels and a sharp decline in consumer business valuations are among the key risks.

Disclaimer

The stock recommendation and a revision in target price are considering the company's fundamentals. Nonetheless the analysts metrics need not be taken as the sole criteria to engage in any kind of transaction in the counter.