According to a recent report by Morgan Stanley, multiple areas of re-rating are expected to take center stage for Reliance Industries. (RIL). As the company navigates through the current earnings upgrade cycle, the 13% year-to-date move seems to be well priced in.Come from Sports betting site
With an “Overweight” call, Morgan Stanley maintains a target price of Rs 3,046 on the RIL stock price. Over the past year, Reliance Industries stock has surged by 35%, with a further 10% increase since the beginning of the year. Presently, the stock trades at 24 times price-to-earnings and 10 times EV/EBITDA based on the company’s FY26 earnings estimate.
Over the past decade, RIL’s energy vertical has seen a de-rating as consensus shifted towards expectations of a quicker global fuel demand decline.
Saraswati Saree Depot lists at 21% premium; is it a Buy at current levels? Multibagger SJVN jumps 8% after Q1 net profit zooms 31% Reliance Jio Rs 175 plan: Most affordable option with free OTT benefits, but there’s a catch Antler India to double its investments this year
Also Read
However, with forecasts of upgrades in global fuel demand for 2024 and slowdown in Electric Vehicles (EVs) in specific countries, the refining vertical’s earnings are seen rising.
This is akin to the trend seen at US refiners year-to-date, indicating an expansion of one-year forward EV/EBITDA by +1x. Fuel refining profitability remains crucial to upcoming earnings, with an estimated 6% rise quarter-on-quarter in net profit expected for RIL.
The Oil to Chemicals (O2C) EBIDTA is forecasted to reach a peak, despite sluggish margins in chemicals, as Gross Refining Margins (GRMs) are anticipated to rise to $12+/bbl, notwithstanding reduced discounts on oil.
Concerns persist in the chemicals sector after 18 months of de-stocking in olefins and projections of new capacity additions over the next five years. However, the report suggests that the industry may have reached peak bearishness on earnings outlook and multiples.
Also Read
A potential path to normalized demand is expected to raise multiples and global utilization for producers closer to mid-cycle. It is estimated that this quarter should witness a 3-4% quarter-on-quarter rise in EBIDTA/tonne as olefin margins improve and ethane prices fall.
New energy investments are projected to be monetized from the end of 2024, with government initiatives such as solar panel subsidies and tariffs aiding in lowering operating costs for RIL’s integrated energy vertical.
In the telecom sector, RIL’s telecom arm has seen relative underperformance in revenue growth compared to Bharti’s India operations. However, Vodafone Idea’s capital raising increases the probability of industry tariff hikes, potentially leading to RIL’s telecom vertical multiple catching up with Bharti Airtel.
Morgan Stanley estimates an 11% year-on-year EBITDA growth in the telecom vertical, driven by net subscriber additions of 11.5 million, slightly higher than the previous quarter.Come from Sports betting site VPbet
