It seems the September quarter numbers of Reliance Industries (RIL) disappointed investors as the shares of the company declined nearly 2% in intraday trade on October 25.
The stock ended 1.53% lower at ₹2,441.85 on BSE.
RIL, on October 21, reported its net profit remained almost flat at ₹13,656 crore during Q2FY23 from the year-ago quarter.
Besides, the company announced its financial services arm's demerger and its listing on the Indian stock exchanges.
On October 21, Reliance Industries said it will demerge its financial services undertaking into Reliance Strategic Investments; it will be named Jio Financial Services and would be listed on the Indian stock exchanges.
Shares of the company have given low returns this year so far, however, still better than the benchmark Sensex. As of October 24, the stock has gained 5% against a nearly 3% gain in the benchmark Sensex.
Brokerages remain largely positive
Brokerage firm Sharekhan by BNP PARIBAS has maintained a buy call on the stocks with a target price of ₹3,050.
"RIL is our top pick. We expect continued strong earnings traction in its consumer-centric business – Jio (likely further telecom tariff hike and ramp-up of home broadband) and retail (high growth in retail, led by market share gain and new commerce)," said Sharekhan.
"Further, value unlocking in digital and retail (with a likely IPO for the consumer business) would add value to shareholders’ return over the coming years. Moreover, a new energy investment plan of $10 bn is expected to create long-term value for Reliance Industries," Sharekhan said.
However, the brokerage firm highlighted that lower-than-expected refining and petrochemical margins in case global capacity additions surpass incremental demand.
Besides, slower-than-expected subscriber additions and ramp-up of broadband services; and a slowdown in the retail business amid Covid-19 could impact earnings and valuations, Sharekhan said.
Motilal Oswal Financial Services has maintained a 'buy' call on the stock with a target price of ₹2,855. The brokerage firm expects revenue/EBITDA CAGR of 16%/21% over FY22E-24 backed by 10%/8% CAGR in ARPU/subs, respectively.
"Going forward, the market share gains from VIL, tariff hikes, wireline – Jiofibre subscriber additions and other digital avenues triggered by 5G rollout should drive growth," Motilal Oswal said.
Among the global brokerage firms, JPMorgan has maintained an 'overweight' call on the stock with a target price of ₹3,065.
As reported by CNBC-TV18, JPMorgan said the demerger of Jio Financial Services is a crucial event. The brokerage firm also said that the company reported a strong operating quarter even as the fuel export taxes hit EBITDA.
"The second half of the financial year should see the full benefit of higher gas prices flow through to earnings," CNBC-TV18 reported JPMorgan saying so.
HSBC has a 'hold' call on Reliance stock with a target price of ₹2,500. The brokerage firm said continued capex intensity will likely weigh on the stock, CNBC-TV18 reported HSBC saying so.
Technical analysts expect a small pullback in RIL stock prices after the recent rally.
Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers highlighted that Reliance has been making higher highs and higher lows since September 30, 2022 after a successful reversal from a bullish alternate bat pattern.
"The 200-point rally which started on September 30, 2022, and continued till October 19, 2022, has stalled and we are expecting a small pullback till ₹2,420- ₹2,430 levels, which will be a safe zone for fresh longs for traders and investors who didn't catch its previous 200-point rally," said Patel.
"On the indicator front on a daily scale, the 21-day rate of change has turned positive and placed at 0.95 levels which hints at the upside. Expected upside levels are ₹2,600 and credible support is seen at ₹2,400," said Patel.
Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher pointed out that the stock, after the pullback from ₹2,340, has witnessed resistance near the significant 200DMA level of ₹2,514 and is anticipated for a short correction with strong support seen near the ₹2,340- ₹2,350 zone.
"On the upper side, a decisive break above ₹2,515 would only give a breakout and can expect for a further upward move for an initial target of ₹2,630. As of now, a sideway movement in anticipated with a little weak bias is anticipated and would need to establish some conviction in the coming days for a clear directional move," said Parekh.
According to a MintGenie poll, an average of 31 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
