MOSL: Morning India (13/August/19): 1. Reliance Industries (Upgrade to Buy); 2. Shree Cement; 3. Nestle India; 4. Eco Scope; 5. NTPC; 6. BPCL; 7. Britannia Inds.; 8. GAIL (India); 9. Divi's Lab.; 10. Hindalco I
MOrning India (13/August/19): 1. Reliance Industries (Upgrade to Buy); 2. Shree Cement; 3. Nestle India; 4. EcoScope; 5. NTPC; 6. BPCL; 7. Britannia Inds.; 8. GAIL (India); 9. Divi's Lab.; 10. Hindalco Inds.
Today’s top research Idea
Reliance Industries: A new beginning! Upgrading to Buy
- We had downgraded the stock to Neutral in Apr'19 (), citing (a) upcoming weakness in the refining and petrochem margins and (b) the build-up in the telecom and retail segments was already factored in our valuations.
- Moreover, we were concerned about the rising debt amidst high capex intensity. Since then, the stock has declined by ~20%. The AGM went a long way in allaying those concerns. Our estimates suggest consol. interest cost of INR268b in FY21, ~24% of EBITDA. A decrease in net debt of INR100b would result in an EPS increase of ~1.2% in FY21. The core segment is expected to remain under pressure. However, the decline of ~20% in the stock price since our last report, combined with the possibility of a decrease in net debt, makes us upgrade RIL to Buy reiterating our TP of INR1400.
Piping hot news
RIL to sell 20% in oil-to-chemicals unit to Aramco at $75-B enterprise value
Reliance Industries on Monday signalled a tectonic shift in its decades-long, successful business model of going it alone by proposing to offload stake in its oil-to-chemicals business to Saudi Arabian giant Aramco for an enterprise value of $75 billion (around Rs 5.3 lakh crore). It also announced that it will henceforth forge partnerships for major businesses with global giants and confirmed reports of strategic interest in its telecom and retail businesses.
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