RIL top loser today! Should you make most of this distress to earn big? This is a money magnet going forward

RIL share price has dropped by more than 2% after touching intraday low of Rs 1,076.60 per piece.

Representational Image: Photo: Reuters

The share price of Reliance Industries today emerged among the top losers on Sensex, despite making big announcements recently and achieving strong September 2018 quarter result. Today, the share price of RIL was trading at Rs 1,084.05 per piece on BSE down by Rs 17.60 or 1.60% at around 13:21 hours. However, the share price has dropped by more than 2% after touching intraday low of Rs 1,076.60 per piece. Interestingly, if you are planning to invest in this

Mukesh Ambani’s company, you might want to make most of its current distress. RIL is seen turning a money magnet and if you invest today, analysts have given a buy call, you will be in a great position to really earn big.

Last week, the company announced its Q2FY19 result, where its revenue surged by a whopping 54.5% to Rs 156,291 crore ($ 21.6 billion), whereas net Profit increased by 17.4% to Rs 9,516 crore ($ 1.3 billion).

During Q2FY19, cash Profit increased by 17.8% to Rs 15,510 crore ($ 2.1 billion). Also Gross Refining Margin (GRM) of $ 9.5/bbl for the quarter.

Moreover, even RIL’s telecom arm Reliance Jio did not disappoint its parent by adding profits in its book. RJio reached a subscriber base of 252 million and monthly ARPU was Rs 132. However, at Rs 6.8 billion (+11% q-q), PAT was 9% below forecast as interest cost spiked 30% q-q.

So, should you invest today, when RIL is suffering.

In Normura’s view, the outlook in both energy and consumer business remains robust. After EPS growth of 19%-21% in FY17-18, we expect stronger 33% growth in FY19F, driven by petchem. We expect 21-22% growth in FY20- 21F, driven by PCG, IMO regulation changes, and Jio/Retail.

Nomura added further, “We use a sum-of-the-parts valuation to value RIL’s different businesses. For its core refining/petchem businesses, we use 7x/8x average FY20-21F EV/EBITDA. We use DCF to value the E&P business (discounted back to March 2020).”

It said, “We value R-Jio at 7.5x FY21F EV/EBITDA. We value Reliance Retail at 15x average FY20-21F EV/EBITDA. Our target price is INR1,480. The benchmark index for this stock is the Nifty 50. RIL currently trades at 11.6x FY20F P/E.”

Similar opinions were from Motilal Oswal. Analysts over here said, “We expect Singapore GRM to average USD6/bbl, going forward. High oil prices, combined with narrowing light-heavy differential and weak demand, are likely to result in poor refining margins in the near term, though.”

Motilal explained that, with its higher complexity and flexibility, RIL is expected to generate higher GRM of USD11-12/bbl over FY19-20. Petcoke gasifiers are expected to ramp up by FY19-end.

“On FY20 basis, the stock trades at 13.3x consolidated EPS of INR86 and EV/EBITDA of 7.4x. In 1HFY19, the company has clocked consolidated PAT of INR190.3b v/s our FY19 estimate of INR395b. Our SOTP-based fair value stands at INR1,479/share. Maintain Buy,” says Motilal.

Hence, if you want to earn big, Reliance is a stock to focus on.

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