Brokerages mixed on RIL post Q4; should you buy, sell or hold?

Brokerage firms remain mixed on Reliance Industries after March quarter results as CLSA, Nomura maintained their buy rating whereas Kotak Institutional Equities maintained 'sell' while IDBI Capital downgraded the stock to hold.

Investors who are already invested in RIL may remain long on the stock as some brokerage remains confident of a strong rally of over 10 percent in the next 12 months.

CLSA has the most aggressive target price on RIL at Rs 1,665 for next month which translates into an upside of 20 percent from April 18 close.

However, as the view remain mixed, investors should avoid fresh longs, suggest experts.

Reliance Industries, India's largest company by market capitalisation, reported a 9.8 percent YoY growth in fourth quarter consolidated net profit to Rs 10,362 crore. This was driven by a 19.4 percent increase in quarterly revenue to Rs 1.54 lakh crore.

The company attributed the robust revenue performance to strong growth in its retail and digital services businesses that grew 51.6 percent and 61.6 percent, respectively. Higher petrochemical volumes also contributed to growth in revenue, the company said.

The company's board has recommended a dividend of Rs 6.50 per equity share of Rs 10 each for the financial year ended March 31, 2019.

The company's Q4 gross refining margin (GRM) came in at $8.2/bbl against $8.8 a barrel reported in the December quarter of FY19 and $11/bbl in Q4FY18.

Here’s what other brokerage firms recommend on RIL after its Q4 results:

CLSA: Buy| Target raised to Rs 1,665 from Rs 1,500

CLSA marinated a buy rating on RIL after March quarter results and raised its target price to Rs 1,665 from Rs 1500 earlier.

$15 billion cuts in liabilities and capex intensity may have peaked, said the CLSA note. Lease payments for demerged assets drive a 3-8 percent cut in EPS estimates.

Nomura: Buy| Target: Rs 1,400

Nomura maintained a buy call on RIL with a target price of Rs 1,400. Refining margins recovered from the low levels, and the ramp-up of petcoke gasification over the next few months is also positive for refining margins.

Nomura is of the view that IMO regulation changes are positive for refining margin. Petchem continues to do well, while the polyester chain margin has remained strong.

The pace of growth in both retail & Jio remains quite strong, and with the transfer of fibre/Jio to InvIT, Jio has become asset-light, said the report. Nomura further added that Jio capex should decline now.

Kotak Institutional Equities: Sell| Target: Rs 1,100

Kotak Institutional Equities maintained its sell rating on Reliance Industries. The brokerage also maintained its target of Rs 1,100.

The domestic brokerage firm revised FY20-21 consolidated EPS estimates to Rs 75 (-2 percent) and Rs 87 (+1 percent).

The brokerage firm is factoring in lower subscribers/ARPU for Jio. RIL has not incorporated fiber/tower demerger in the P&L yet. Kotak remains concerned about persisting high capex and rising leverage.

IDBI Capital: Downgrades to hold| Raises target to Rs 1,400 from Rs 1,326

IDBI Capital downgraded RIL to hold from a buy earlier but hiked the target price to Rs 1,400 from Rs 1,326.

The downgrade is largely on account to price appreciation and limited upside. The brokerage firm hiked target to reflect FY21 estimates.

IDBI Capital expects higher opex due to demerger that will be offset by lower depreciation and interest.

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