Global brokerage firms like Morgan Stanley and Macquarie upgraded Reliance Industries Ltd (RIL) shares on Tuesday, August 13, after chairman Mukesh Ambani announced Saudi Aramco’s investment, debt-reduction plans and possible listing of telecom and consumer businesses at the company’s 42nd annual general meeting (AGM) in Mumbai. No wonder, RIL shares soared as much as 12% in intra-day trade on Tuesday.
Macquarie upgraded the RIL stock to ‘outperform’ while raising its target price to Rs 1,370 from Rs 1,220. The brokerage house said that Saudi Aramco’s transaction will serve to allay concerns over the company’s growing debt, but it still does not see a zero-net debt in its base-case scenario. Mukesh Ambani had on Monday announced that Saudi Aramco will invest 20% in RIL’s oil-to-chemicals division at an enterprise value of $75 billion.
Morgan Stanley also upgraded RIL to ‘overweight’ from ‘equal-weight’ after the AGM with a target price of Rs 1,349. “It is time to relook at the stock,” a Morgan Stanley note said. “Cheaper ethane feedstock could drive upside in PE (price-earnings) multiple, and faster asset monetisation could surprise the Street,” it added.
UBS and CLSA also raised their target prices on the RIL stock to Rs 1,500, and 1,530, respectively, while maintaining ‘buy’ rating. “AGM announcements should dispel fear over leverage. The company sets the stage for the next leap for tech and consumer businesses,” said the CLSA note. It added that there was a possibility of a re-rating as the reach of technology and consumer businesses was appreciated.
Tokyo-based global investment bank Namura was the most aggressive in its upgrade of the RIL stock. The brokerage house set a target price of Rs 1,600, which gives space to nearly 38% upside from the closing price of Rs 1,162 on Friday.
Nomura sees the road map for the zero-net debt as a positive, though the oil-to-chemicals division may not be demerged soon, it added.
At 11:28 am, the RIL stock was trading at Rs 1,283.70, up 10.5%, at BSE after hitting an intra-day high of Rs 1,302.80.
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