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Reliance Industries shares hit fresh 52-week high; should you buy?

Shares of Reliance Industries hit their fresh 52-week high of Rs 1095.50 in morning trade on Thursday.

By: | New Delhi | Updated: September 22, 2016 11:01 AM
BSE Sensex, NSE Nifty, Shares of Reliance Industries hit their fresh 52-week high of Rs 1095.50 in morning trade on Thursday. (Photo: Reuters)

Shares of Reliance Industries hit their fresh 52-week high of Rs 1,095.50 in morning trade on Thursday. The stock has continuously outperformed benchmark BSE Sensex in the past one year by surging 22 per cent to Rs 1,071.35 till September 21, whereas the benchmark index gained nearly 9 per cent during the same period. On September 22, the scrip was trading 1.73 per cent up at Rs 1,090.80 in the morning trade (at 10.22 am). Shares of the company opened the day at Rs 1,080 and have touched a high and low of Rs 1,095.50 and Rs 1,079.10, respectively, in trade so far.

The Mukesh Ambani-led company has commercially launched its much-awaited telecom services Reliance Jio during the first week of September. On a month-to-date basis, shares of the company have risen 4 per cent, whereas Sensex has gained marginally 0.29 per cent. Brokerage Religare Institutional Research is bullish on the further movement of Reliance Industries (RIL) shares with a September 2017 target price of Rs 1,200.

Religare in a research note said, “RIL’s US $21 billion investment in Reliance Jio (around 25 per cent of balance sheet) over the last six years has hobbled stock performance. But considering the 30 per cent CAGR in core earnings (ex-RJio) and US$ 20 billion in cash flows over FY17-FY19E, the telecom arm would be less of a concern three years on, even if it’s still loss-making.” The company commercially launched its Reliance Jio operations on September 5. During August 31 and September 7, shares of the company slipped by nearly 4 per cent to Rs 1017.45.

For the quarter ended June 30, 2016, RIL reported a consolidated net profit of Rs 7113 crore, up 18.08 per cent, against Rs 6024 crore in the corresponding quarter a year ago. However, consolidated net sales of the company dipped by 15.17 per cent year-on-year to Rs 64990 crore for the quarter under review. On a standalone basis, the company reported a net profit of Rs 7,548 crore, up 18.51 per cent, against Rs 6369 crore in the same quarter last fiscal.

In Q1FY17, Reliance Industries’ gross refining margin (GRM) stood at $11.5 per barrel against $10.8 per barrel in the sequential quarter ended March 31, 2016 and $10.4 per barrel in Q1FY16. According to IndiaNivesh Securities, GRM was boosted quarter-on-quarter due to better risk management and inventory gain of around $2 per barrel. During April-June 2016, the average benchmark Singapore complex margin stood at $5 per barrel as compared to $7.7 per barrel in Q4FY16 and $8 per barrel in Q1FY16. RIL had a premium of $6.5 per barrel over Singapore GRM.

IndiaNivesh in a research note said, “RIL’s return on equity (ROE) improved to 11.8 per cent in 2015-16 from 10 per cent in 2014-15. We expect ROE to improve further during FY17-18, when its large projects will commence. RIL’s best-in-class refineries would continue to drive near-term earnings and the earnings jump from around US $40 billion of investment across telecom, gasifier, ROGC and petcoke should be visible by the end of the fiscal year 2017 which will lead to substantial free cash flow in FY18.” The brokerage house is bullish on RIL shares with a target price of Rs 1365.

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