RIL unlikely to see any earnings upgrades, says CLSA

MUMBAI: Shares of Reliance Industries have surged over 13 per cent in the past week on hopes of big earnings upgrades due to the rise in petrochemical spreads. However, CLSA believes that earnings upgrades are unlikely. The brokerage said 's annual report does not mention Saudi Aramco deal, which means that the deal is not imminent and this may limit near-term upside for the valuation of its oil-to-chemicals business.

"Spot petchem spreads may drive a $500 million or 3 per cent uptick in Reliance’s consolidated FY23 Ebitda or a $4 billion addition to its fair value. But this may not be large enough to offset the risk to the optimistic recovery in refining margins or a telecom tariff hike that are baked-into our estimates, and contributes nearly 75 per cent of our FY21-23 earnings growth," said CLSA.

The brokerage has retained outperform rating on Reliance's long term prospects. The brokerage has a target price of Rs 2,250 on the stock.
"While hopes of positive announcements from the upcoming AGM (annual general meeting) may provide fuel for the stock over the coming two weeks, we do not foresee big near-term triggers. We are positive on the long-term prospects of its ecommerce and tech businesses," said CLSA.