Reliance Industries hits all-time high, Goldman Sachs retains Buy, downgrades other oil stocks

Goldman Sachs’ 12-month target for Reliance Industries now stands at Rs 2,885 versus Rs 2,660 earlier

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Reliance Industries’ share price rallied 2.7 percent on January 10 and hit all-time high of Rs 2,658.95 on the BSE. The strong upmove came on the back of heavy trading volumes, after Goldman Sachs reiterated its Buy rating on the stock, while downgrading rating on other oil stocks.

It has retained its Buy rating on the back of “exposure to structurally growing consumer and tech businesses, compounding with a robust oil to chemical business”. Goldman Sachs’ 12-month target for Reliance Industries now stands at Rs 2,885 versus Rs 2,660 earlier.

Also Read: Nifty, Sensex gain for 3rd straight day amid high volatility, analysts predict consolidation

Meanwhile, it has revised downwards its EBITDA forecasts for fiscal years FY24, FY25, and FY26 by -2 percent, -3 percent, and -4 percent, respectively.

This revision incorporates updated projections for refining and chemical margins, lowered telecom earnings estimates due to delayed tariff hike assumptions and adjustments to the capacity ramp and margin for the new energy business.

Despite the downward revisions in earnings estimates, the 12-month Sum-of-the-Parts (SOTP) based target price for RIL has been revised higher by 8 percent. “This revision accounts for roll forward of the Discounted Cash Flow (DCF) for consumer businesses, which helped offset the impact of lowered earnings estimates,” Goldman Sachs said.

Also Read: Vibrant Gujarat Summit | RIL to help make Gujarat global leader in green growth, says Mukesh Ambani

Earlier in the day, Reliance Industries Chairman Mukesh Ambani said that Reliance will contribute in making Gujarat a global leader in green growth.

Speaking at the the inauguration of Vibrant Gujarat Summit on January 10, Ambani said Reliance invested more than $150 billion, or Rs 12 lakh crore, in creating world-class assets and capacities across India in the past 10 years. Of this, more than a third has been invested in Gujarat, he added.

Goldman Sachs’ outlook for other oil stocks

Meanwhile, global investment bank Goldman Sachs believes the risk-reward is now less favourable for ONGC, Indian Oil and Bharat Petroleum, after the recent rally in these stocks. Thus, it has downgraded ratings on the three stocks.

Also Read: Budget 2024: Power sector wants policy consistency, lower GST rates, easy access to subsidies

It has downgraded ONGC to Sell from Neutral with a revised target price of Rs 175 versus Rs 160 earlier, Indian Oil to Sell from Neutral with revised target price of Rs 105 against Rs 85 earlier, BPCL to Neutral from Buy with target price of Rs 500, against prior target of Rs 435.

ONGC share price has rallied about 30 percent in the past six months but Goldman believes there is limited upside to ONGC’s earnings due to windfall taxes on crude oil and a domestic gas price cap.

For Indian OMCs, it believes share prices have rallied ahead of fundamentals while there is limited upside potential to marketing margins as oil price remains in a relatively higher range of $70-90 per barrel.

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Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.