January 11:
MUMBAI: Brokerage houses such as Morgan Stanley, Credit Suisse and EdelweissBSE 5.96 % expect Reliance IndustriesBSE 2.09 % (RIL) to report one of its steepest quarterly profit declines in its December 2014 quarter earnings (Q3 FY15), hit by inventory valuation losses as crude prices have plummeted during the quarter. But despite the reverses, brokerages continue to remain bullish on the stock over compelling valuations.
"We forecast Reliance Industries to report weak Q3 FY15 earnings. The company is likely to post one of the steepest falls in quarterly earnings, which is about 13% quarter-on-quarter (QoQ) drop, and 9% year-on-year (YoY) fall in profits to around Rs 5,000 crore in Q3 FY15, due to inventory valuation loss, as average crude prices have plunged 26% QoQ," said Jal Irani, analyst at Edelweiss.
"We expect near-term weakness in the stock price, but have retained a 'buy' rating on RILBSE 2.09 % with a price target of Rs 1,161 over compelling valuations." Analysts say RIL's petrochemical earnings may also come under pressure as its Hazira plant was shut down for a month for maintenance. RIL is expected to report its earnings on January 16.
Falling crude has hurt the RIL stock and could remain an overhang on earnings for a couple of quarters more. But, the chemical project expansion is on track and the launch of Reliance's telecom operations should also be a near-term catalyst for the stock. We maintain an 'outperform' rating on the stock with a price target of Rs 1,155," said Sanjay Mookim, analyst at Credit Suisse. The RIL share has risen only 2% over the past year, underperforming both the ET Oil & Gas Index, which gained 16% in the same period, and the benchmark index, BSE Sensex, which gained 34.7%.
This is the seventh successive year of RIL's underperformace against the Sensex, as investors are concerned about the company's future earnings. On Friday, the stock closed at Rs 860, up 2.09%. But, analysts expect investors to look at it favourably as the company's $8.5-billion petchem investment will become operational by 2016, which will drive annual volume growth by 12%, while its superior refinery complexity will support higher gross refining margins (GRMs) against regional peers.
Source: economictimes.indiatimes.com/markets/stocks/news/rils-profits-may-fall-steeply-but-brokerages-still-bullish/articleshow/45847446.cms?
MUMBAI: Brokerage houses such as Morgan Stanley, Credit Suisse and EdelweissBSE 5.96 % expect Reliance IndustriesBSE 2.09 % (RIL) to report one of its steepest quarterly profit declines in its December 2014 quarter earnings (Q3 FY15), hit by inventory valuation losses as crude prices have plummeted during the quarter. But despite the reverses, brokerages continue to remain bullish on the stock over compelling valuations.
"We forecast Reliance Industries to report weak Q3 FY15 earnings. The company is likely to post one of the steepest falls in quarterly earnings, which is about 13% quarter-on-quarter (QoQ) drop, and 9% year-on-year (YoY) fall in profits to around Rs 5,000 crore in Q3 FY15, due to inventory valuation loss, as average crude prices have plunged 26% QoQ," said Jal Irani, analyst at Edelweiss.
"We expect near-term weakness in the stock price, but have retained a 'buy' rating on RILBSE 2.09 % with a price target of Rs 1,161 over compelling valuations." Analysts say RIL's petrochemical earnings may also come under pressure as its Hazira plant was shut down for a month for maintenance. RIL is expected to report its earnings on January 16.
Falling crude has hurt the RIL stock and could remain an overhang on earnings for a couple of quarters more. But, the chemical project expansion is on track and the launch of Reliance's telecom operations should also be a near-term catalyst for the stock. We maintain an 'outperform' rating on the stock with a price target of Rs 1,155," said Sanjay Mookim, analyst at Credit Suisse. The RIL share has risen only 2% over the past year, underperforming both the ET Oil & Gas Index, which gained 16% in the same period, and the benchmark index, BSE Sensex, which gained 34.7%.
The positive impact of a strong benchmark gross refining margins (GRMs) and petrochemical margins has been negated by the negative impact of crude inventory valuation losses. Overall, we expect standalone profits to be around Rs 5,090 crore, down 11% QoQ and 8% YoY," said Vinay Jaising, analyst at Morgan Stanley. The stock has fallen about 25% fromits 52-week high and is trading below the 2012 buyback price of Rs 870.
This is the seventh successive year of RIL's underperformace against the Sensex, as investors are concerned about the company's future earnings. On Friday, the stock closed at Rs 860, up 2.09%. But, analysts expect investors to look at it favourably as the company's $8.5-billion petchem investment will become operational by 2016, which will drive annual volume growth by 12%, while its superior refinery complexity will support higher gross refining margins (GRMs) against regional peers.
Also, the government's decision to make RIL's existing deep-water discoveries eligible for premium gas prices is a positive development. Derivative analysts say RIL's 900 call option strike has a maximum build-up of open interest of 11.09 lakh shares, suggesting the stock may try to move up to the Rs 900 levels in the January series.
Source: economictimes.indiatimes.com/markets/stocks/news/rils-profits-may-fall-steeply-but-brokerages-still-bullish/articleshow/45847446.cms?
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