MUMBAI: Brokerage firm JP Morgan expects earnings growth at Reliance IndustriesNSE -0.32 % (RIL) to decline 15 per cent this fiscal on weak refining and petchem margins. To help offset weakness in its core business, RIL needs to raise Jio tariffs by 12-20 per cent, although the competitive landscape in the telecom industry might lengthen the odds on such increases, JP Morgan said.
Shares of RIL, which have the highest weightage on the Sensex and Nifty, fell 2.7 per cent to . Rs1,281.50 ..
JP Morgan is the second global brokerage in the past one month to raise concerns over RIL’s earnings growth. Last month, Morgan Stanley said that RIL’s earnings growth could halve in FY20, after the company delivered a steady 17 per cent CAGR in earnings between FY17 and FY19.
However, the weakness in the core energy business – refining and petchem – is not likely to weigh on the stock price in the near term as investors continue to re-rate the consumer tech business higher. JP Morgan maintained its neutral rating on the RIL stock with a target price of Rs1,300.
RIL has been an outperformer over the last year with 31 per cent returns, compared with 10 per cent gains for the Nifty. Credit Suisse last month cut RIL’s target price from Rs1,425 to Rs1,350, while ..
Currently, J P Morgan has not reduced the earnings estimate of RIL as it expects a sharp recovery in gross refining margins (GRM) in the second half of FY20.
RIL’s petchem earnings have moved higher over the past two years. Quarterly EBIT run rate has increased 2.3 times due to volume growth, with new project commissioning across PX, ROGC and ethane shipping.
Key upsides for the RIL stock, according to JP Morgan, are Jio’s ability to take larger-than-expected tariff hikes, pick ..
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