Kotak Securities Downgrades RIL Stock Ratings; CLSA Remains Bullish
CLSA increased its price target after the Reliance Industries unveiled the new Jio phone.
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Kotak Securities has downgraded Reliance Industries Ltd.’s stock rating to ‘Reduce’ from an earlier ‘Add’ on debt concerns.
The broking firm said the stock is currently pricing in optimism from both downstream and telecom business. While it downgraded its rating, the brokerage house retained its target price at Rs 1,500.
We remain wary of high capex run-rate and rising net debt levels. The latter may take time to reduce unless Jio accelerates pace of increase in average revenue per user (ARPU)/revenues.Kotak Securities Report
RIL’s current estimated value of Rs 7.1 lakh crore, including effective net debt of Rs 2.4 lakh crore, is essentially pricing in an EBITDA of Rs 1 lakh crore in the foreseeable future, assuming a reasonable growth of seven times, which will be difficult to achieve over the next 3-4 years due to cyclically high downstream margins, stronger contribution from ongoing projects and generous assumptions for Jio.
The broking firm has also revised its estimates factoring in updates from the company’s annual general meet on Friday and analyst meet.
CLSA Continues To Remain Bullish
Brokerage firm CLSA continued to remain bullish on the stock of Mukesh Ambani-led company, maintaining its ‘Buy’ rating while increasing price target to Rs 1,920 from Rs 1,710 earlier.
The move comes after the company unveiled new JioPhone. CLSA has also raised Jio’s EBITDA by over $1 billion after the launch of the new phone, leading to 1-24 percent increases over calendar year 2018-20 earnings per share.
What Brokerage Firms Said About The New Jio Phone
CLSA
- With Jio already at over 100 million paid users, we raise active smartphone users as of March 2021 estimates to 141 million
- Foresee Jio’s profit before tax to breakeven by financial the year 2018-19 (FY19)
- Higher Jio estimates along with increase in Gross Refining Margins (GRMs) drives increase in 2018, 2019 and 2020 estimated EPS
Kotak Securities
- Rs 20,000 crore capex guidance for Jio over the next 3-4 quarters, as it targets to ramp up coverage to 99 percent of population over the next 12 months
- Jio capex takes sheen away from JioPhone
- The announcement of JioPhone, a 4G feature phone at security deposit of Rs 1,500 and tariff of Rs 153 for 28 days was certainly positive versus speculations
- Expects paid subscriber base to increase to a substantial 252 million by FY2020E, with an ARPU of Rs 182 per month