Potential for re-rating across verticals in RIL: Morgan Stanley
Reliance Industries (RIL), global broking firm Morgan Stanley has taken an overweight stance on the oil-to-retail conglomerate with a price target of Rs 3,046, signaling an upside potential of 2%.
RIL’s energy vertical, which had experienced de-rating over the past decade due to expectations of a rapid decline in global fuel demand, is now set to reflate, the brokerage said.
This is particularly evident in the refining vertical, where multiple expansion is anticipated, in line with the trend observed in US refiners year-to-date, as stated in the report released by the brokerage firm, estimated to witness a 6% quarter-on-quarter increase in net profit for RIL in the upcoming earnings for Q4FY24, primarily driven by fuel refining profitability, it said.
In the chemicals segment, concerns persist following 18 months of de-stocking in olefins and forecasts of new capacity additions over the next five years. However, despite sluggish margins in chemicals, the oil-to-chemicals (O2C) EBITDA is projected to reach a peak, with gross refining margins (GRMs) expected to rise to US$12+/bbl, despite reduced discounts on oil, Morgan Stanley analyst Mayank Maheshwari said in a note.
The Mukesh Ambani-led company, which is expected to declare its March quarter numbers later in the month, is seen as witnessing a 3-4% quarter-on-quarter increase in EBITDA/ton, driven by improved olefin margins and falling ethane prices.
The report further suggests new energy investments are slated to be monetized from end-2024. While concerns
