Buying opportunity following RIL Share Price Correction: Jefferies

Reliance Industries (RIL) stock has decreased by nearly 12% from its most recent high.

Reliance Industries’ (RIL) stock has declined by nearly 12% since its most recent high. According to global brokerage Jefferies, factors that will favourably affect refining margins in CY22 include multi-year low stocks, dropping Russian exports, muted Chinese exports, decreased diesel output in Europe, and delays in the construction of ME refineries.

The brokerage firm maintains a Buy rating on RIL shares with a target price of 2,950 because it sees an opportunity in the recent stock price fall.

“RIL is a key beneficiary of energy inflation, with every $1/bbl improvement in annualized refining margins adding an estimated $ 400-450 mm to RIL’s Consol EBITDA (2% uplift). Initial estimates suggest RIL could deliver 60% sequential growth in O2C Ebitda in 1QFY23E with likelihood of earnings upgrade,” the note stated.

On the strength of strong oil refining margins and consistent development in the telecom, digital services, and retail operations, RIL announced a nearly 22 percent increase in its fourth-quarter earnings at 16,203 crore. The Mukesh Ambani-led conglomerate’s operating revenue increased by 37% to 2.11 lakh crore in the three months ending March 31, 2022. It made history by being the first Indian corporation to reach $100 billion in annual revenue.

Reliance Industries is one of the few large Indian companies with a positive earnings revision cycle ahead, given the strong refining and gas environment, according to JP Morgan, which last week raised the rating on RIL shares from Neutral to Overweight. This change was motivated by the global view of the strong refining environment.

Reliance Industries, which has holdings in petrochemicals, oil and gas, telecom, and retail, is chaired and managed by Mukesh Ambani. Although oil-refining and petrochemicals account for about 60% of Reliance’s earnings, the conglomerate has been lowering this reliance by diversifying into retail, telecommunications, and technology.