MOSL: RELIANCE INDUSTRIES (Neutral)-TRAI boost to RJio-increasing target price
​Reliance Industries: TRAI boost to RJio; increasing target price
(RIL IN, Mkt Cap USD84.9b, CMP INR840, TP INR941, 12% Upside, Neutral)
- The Telecom Regulatory Authority of India (TRAI) has reduced the interconnect usage charge (IUC) from 14p/min to 6p/min with effect from 1st October 2017. This would be further reduced to zero from 1st January 2020.
- ~40% reduction in RJio’s access cost would result in the company’s EBITDA increasing by 43%/31% in FY19/20.
- We also roll over our valuation to September 2018, and increase our target price on Reliance Industries (RIL) from INR750 to INR950, implying a 13% upside.
Revising RJio’s EBITDA by 43%/30% for FY19/20E led by IUC savings
- ​Based on the reduction in the IUC rate, RJio’s access cost is revised down by ~INR30b (40%) to INR44b/49b for FY19/20E. Subsequently, we have revised up our EBITDA estimates for FY19/20E by 43%/31% to INR91b/INR130b. Our subscriber and ARPU estimates for FY19/20E remains intact at 132m/156m and INR215/INR229, respectively.
- Zero IUC by 2020 may not alter the scenario significantly. We believe that, by 2020, a significant proportion (70-75%) of subscribers would be data subscribers. In the event of complimentary voice offerings, bundled (data and voice) price plans should protect incumbents’ ARPUs.
Reliance Industries is primarily engaged in the production and market of petrochemical products, and refinery and retail of petroleum and LPG. Co.'s petrochemical products include polymer - polypropylene (PP), polyethylene (PE), poly vinyl chloride (PVC); polyester - polyester filament yarn (PFY), polyester staple fiber (PSF), polyethylene terephthalate (PET); polyester intermediates - paraxylene (PX), purified terephthalic acid (PTA), mono-ethylene glycol (MEG); and cracker products - ethylene, propylene and aromatics. Co. is also engaged in the manufacture of RELAB and textiles. Co.'s textile products are sold under the brand names: Only Vimal, Harmony, Reance, RueRel and V2.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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