Mumbai: Shares of Reliance Industries Ltd (RIL) closed at a record high on Monday as investors continued to buy the stock on optimism that its earnings may improve further after the full commissioning of its core refining and petrochemicals projects and because of its aggressive moves in the telecom segment.
During the day, the RIL stock gained 2.5% to hit Rs1,624.80, a level last seen on 15 January 2008. It shed some of the gains to close at Rs1,616.10, up 1.89% from its previous close.
The last record high for the RIL stock was on 14 January 2008 when it hit Rs1,608.15.
The stock has added nearly Rs2 trillion market capitalization in the past five months and so far this year, it is the second best performing stock on the Nifty index, gaining more than 50.2%.
RIL on 20 July reported a 28% increase in net profit to Rs9,079 crore on higher-than-expected refining and petrochemicals margins and a one-time gain.
Revenue rose to Rs92,661 crore, an increase of 25.5%.
“We upgrade RIL on benefit of full commissioning of core sector projects and revenue visibility of telecom venture (Reliance Jio) with aggressive entry in feature phone users and future entry in broadband business and raise our TP (target price) from Rs1,570 to Rs1,898," said Gagan Dixit and Harshraj Aggarwal from Elara Securities in a note released on 23 July.
RIL’s gross refining margin at the end of the first quarter was at $11.9 per barrel while petchem earnings before interest and tax (ebit) increased considerably by 43.7% year-on-year to Rs4,031 crore, driven by capacity expansion and resilient margins.
According to RIL, its June quarter petchem ebit margin rose to an all-time high at 15.8%.
On Friday, the company at its annual general meeting, launched a new smart-feature phone with refundable deposit of Rs1,500 for three years and said that it is planning to raise population coverage of 99% by fiscal year 2019 from the current over 80%.
Analysts expect that this would expand its subscriber base significantly from the current 125 million.
“Jio’s 4G handset is likely to quickly replace 2G handsets in rural areas, where smartphones had previously been out of reach for many potential customers. Jio is likely to boost its revenue market share from 3-4% to more than 10% in 2018. We expect most of the increase to come from new revenue generated by the expansion of the 4G market," said Fitch Ratings in a 24 July note.
Harshvardhan Dole and Mohit Agrawal of IIFL in a note released on Monday said, “We have upgraded estimates for Jio, with an upward revision in enterprise valuation to $29 billion from $12 billion earlier. Jio’s valuation could see further upside if execution exceeds expectations. RIL is expected to consolidate Jio’s financials from 2QFY18 after which we expect more clarity."
Currently, 23 brokers have a “buy" rating on the script, 13 have “hold" ratings and three have “sell" ratings, according to Bloomberg.