Reliance Industries hits record high, up 5%; increases investors' wealth by Rs 2.4 lakh cr

Moneycontrol News

Shares of Reliance Industries crossed Rs 900-level for the first time Wednesday, up 3.7 percent intraday on value buying following Jio earnings and strong refining margins in quarter ended September 2017. Majority of analysts remained positive on the stock, and expect telecom business to show profits in December quarter after turning EBITDA positive in September quarter.

Analysts are also positive on its refining and petrochemical businesses, especially after company's recent capex that is expected to aid these segments.

The consistent rally in the stock that rose 68 percent in 2017 increased investors' wealth by Rs 2.4 lakh crore during the year. The stock touched a record high of Rs 915.55, up 4.7 percent intraday.

On last Friday, Reliance Industries reported net profit of Rs 8,097 crore for September quarter (up 12.8 percent YoY) on revenue of Rs 101,169 crore (up 24 percent YoY). Its gross refining margins came at USD 12 per barrel against street expectations of USD 12.5 a barrel, which outperformed benchmark Singapore Complex margins by USD 3.7 per barrel.

Higher refining margins and higher production from refining and petchem segments boosted profitability.

Reliance Jio, most keenly watched by analysts, posted a net loss of Rs 270.6 crore in July-September quarter against loss of Rs 21.3 crore in June quarter, which was much lower than analysts’ estimates of around Rs 2,000 crore.

Jio's revenue for the quarter stood at Rs 6,147.06 crore (led by ARPU of Rs 156, coming partly from Q1FY18 recharges) and EBITDA stood at Rs 1,442 crore with margin at 23.45 percent, which also surprised the Street. The company also highlighted Jio numbers in a separate press release.

Most analysts expect Jio to be profitable in December quarter itself, which may be boosting sentiment.

JM Financial expects Jio to swing to profits in Q3, driven by the 57 percent interconnection usage charge (IUC) cut to 6 paise per minute from 14 paise, effective October 1.

Including capitalised operational expenses + interest, Q2 capex was Rs 7,500 crore, versus Rs 18,000 crore reported for Q1.

"Driven by the IUC cut and rollover to Dec-18, DCF-derived equity value for Jio has increased to Rs 1,45,000 crore from Rs 1,20,000 crore previously," JM Financial said.

While recommending buy rating with the target price of Rs 1,200 per share, KR Choksey also believes that given the strong business model of the Jio telecom business and the robust pace of its subscriber addition, going forward, the segment will positively contribute to the bottomline from Q3FY18 onwards.

Edelweiss believes, commissioning of grandiose USD 20 billion core projects is likely to bolster RIL’s earnings, boost return on equity, and turnaround free cash flow (FCF). The research house has maintained its buy call on the stock with increased target price at Rs 1,104 (from Rs 1,009 earlier) factoring higher value from Reliance Jio.

In second half of FY18, Motilal Oswal expects addition of 42 million subscribers, taking the overall subscriber base to 181 million by March 2018 and 205 million by March 2019, from 139 million in Q2FY18, with ARPU estimates of Rs 156/172 in FY18/FY19. The brokerage house upgraded the stock to buy with a target price of Rs 1,005 per share.

At 13:54 hours IST, the stock price was quoting at Rs 914.45, up Rs 40.20, or 4.60 percent on the BSE.