Shares of billionaire Mukesh Ambani-led Reliance Industries plunged on Monday, after global brokerage firm Credit Suisse downgraded the stock. Reliance Industries share price tanked by more than 5% to hit the day’s low at Rs 1,129. Notably, Credit Suisse has slashed RIL’s target stock price to Rs 995. Credit Suisse has downgraded Reliance Industries rating to ‘Underperform’ from ‘Neutral’ and revised its target to Rs 995 from Rs 1,350 earlier. Further, the research firm has cut FY21/FY22 EPS estimates for the refiner by 5%.
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Credit Suisse has raised concerns over slow enterprise rollout and weak Jio average revenue per user (ARPU) in the current fiscal year. It also cut FY21/FY22 earnings per share estimate by 5% to factor in lower refining and petchem margins. In the quarter ended June, Reliance Jio generated an Average revenue per user of Rs 122 and it has also expanded its subscriber base to over 33 crore. Reliance Industries has reported a 6.8% on-year rise in profit at Rs 10,104 crore for the Q1FY20 as against Rs 9,459 crore in the corresponding quarter last fiscal year.
A growth in the retail and telecom businesses helped offset a slowdown at its central oil refining and petrochemical operations. The consolidated revenue from operations surged to Rs 1.72 lakh crore in the period under review. The gross refining margins (GRMs) fell to $8.10 per barrel as against $10.5 per barrel in the same quarter last year. Notably, Credit Suisse has also cut FY21/FY22 earnings per share estimate by 5% to factor in lower refining and petchem margins. Earlier UBS had said in a report that the capex was higher in the quarter, due to higher spending on refinery. The petchem margins were supressed and polyester and polymer margins weakened, noted UBS.
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