RIL share price falls 2.5% after Q4 results miss estimates, but now set to rally; should you buy?

Reliance Industries Ltd had a one-time gain of Rs 797 crore as against a one-time exceptional loss of Rs 4,267 crore in the fourth quarter of FY21

RIL share price fell as much as 2.5 per cent to Rs 1,943.70 apiece in the morning deals on Monday, after the Mukesh Ambani-led firm posted a net profit of Rs 13,227 crore in Jan-Mar quarter, which missed the estimates. Reliance Industries Ltd stock price is down 18 per cent from its record high of Rs 2,368.80 apiece, touched on September 16, 2020. Analysts are mixed on RIL stock post fourth quarter earnings with some maintaining ‘buy’ rating and others ‘hold’. During FY21, Reliance Industries completed fundraising from selling minority stakes in Jio Platforms Ltd and Reliance Retail Ventures (RRVL) to global investors. It raised Rs 1.52 lakh crore in Jio and Rs 47,265 crore in retail.

Moreover, RIL’s board declared a dividend of Rs 7 per share of Rs 10 each for the financial year 2020-21. Following the launch of gas output from newer discoveries in the eastern offshore KG-D6 block, RIL saw its first pre-tax profit in the segment in several years. Revenues in the dominant oil-to-chemicals (O2C) market increased by 4.4% to Rs 1.01 trillion in Q4FY21, up from Rs 96,732 crore the previous year (Q4FY20). “Throughout the last couple of months, we have observed RIL share price has formed a range around Rs 1,900 on the downside, and Rs 2,250 on the upside,” Ashis Biswas, Head of Technical Research at CapitalVia Global Research, told Financial Express Online. Currently, RIL is trading near to its long-term average price of Rs 1,900. “We expect the Rs 1,900 support to hold and the stock to bounce back towards Rs 2,250 after the quarterly numbers marked the probability of the earnings upgrade cycle,” he added.

Reliance Industries Ltd had a one-time gain of Rs 797 crore as against a one-time exceptional loss of Rs 4,267 crore in the fourth quarter of FY21. “Despite fourth quarter profit of Rs 13,227 crore and a 11 per cent growth in revenue, RIL stock has reacted negatively, indicating that FY22 earnings, is likely to be under the scanner with resurgence and spread of the COVID cases,” Aamar Deo Singh, Head Advisory, Angel Broking, told Financial Express Online.

Analysts at Motilal Oswal Financial Services have given a ‘buy’ rating to the stock with a target of Rs 2,195 apiece, an upside of 10 per cent. “We ascribe an equity valuation of Rs 755 per share to RJio on FY23E 18x EV/EBITDA and Rs 670 per share to Reliance Retail on FY23E 31x EV/EBITDA, factoring in the recent stake sale,” they said. While those at ICICI Securities said that retail may lose momentum due to covid second wave while petrochemicals may be hit by large capacity additions in H2/Q4FY22E. “Regaining momentum in subs addition, tariff hikes, retail growth back to pre-covid levels, GRM recovery and stake sale in O2C are key to stock performance improving (underperformed since Sep’20). Retain ‘hold’ with a target price of Rs 2,033 (2 per cent upside),” they said.

HDFC Securities Institutional Equities has given an ‘add’ rating to the RIL stock with a price target of Rs 2,285, implying a rally of nearly 15 per cent. The brokerage frm’s target is premised on induction of Facebook, Google, Intel and Qualcomm as partners in Jio Platforms, which should help the company accelerate the growth of digital connectivity and create value in the digital ecosystem through technology offerings; recovery in refining and petchem businesses in FY22E; the emergence of a clear path to a stronger balance sheet; and stake sale in the retail business.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)