Correction in RIL stock an opportunity to buy, says Jefferies

Jefferies has given

a target price of Rs 2,950, signalling an upside potential of more than 14 per cent for the stock. On Wednesday, the scrip was down 2 per cent at Rs 2,528.

The global research firm believes that the correction in the stock offers an opportunity to buy the counter and there are tailwinds to refining margin in CY22.

“Multi-year low inventories, declining Russian exports and muted exports from China along with lower production of diesel in Europe are the key tailwinds for the year 2022,” Jefferies said.

The brokerage believes Reliance is a key beneficiary of energy inflation and an improvement of every $1 in its annualized refining margin will add about $400-450 billion to its consolidated EBITDA.

“Our initial estimates suggest RIL’s oil-to-chemical business EBITDA could rise 60 per cent on quarter in Q1 this year and account for 35 per cent of our FY23 estimate,” it said. “Continued strength in refining should result in consensus FY23 earnings upgrades.”

Shares of Reliance have dropped about 10 per cent from the recent peak, while they have delivered mild gains in the year 2022 so far.

A week earlier, another global brokerage firm JP Morgan had upgraded Reliance Industries to ‘overweight’ from ‘neutral’ with a target price of Rs 3,170.

RIL is among the few large companies in India with a positive earnings revision cycle ahead, given the strong refining and gas environment, the brokerage firm had said.

“Better earnings outlook of the refining and upstream gas business and strong holding of valuations for non-energy or the consumer business are the key factors attributed for the upgrade,” said the report.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)