Goldman Sachs has raised the earnings estimates for Reliance Industries, Indias most valuable company, for the next two fiscal years and subsequently increased the 12-month share price target to Rs 1,850 from Rs 1,635 earlier, primarily driven by expectations of stronger growth in the telecom business.The brokerage said it was upbeat about RIL in view of the higher average revenue per user (ARPU) from potential tariff increases, coupled with continued strong subscriber addition momentum.
It maintained a buy rating on the shares.We maintain our positive view on the stock, given the sharp sequential acceleration in refining margins due to IMO 2020 and accelerating global GDP driving tight diesel markets; continued high growth in consumer-focused businesses, which we estimate to grow at 50 per cent FY19-22 CAGR; and significant improvement in free cash flow and asset monetisation leading to deleveraging, Goldman Sachs said.The brokerage said that its estimated operating income for RIL will be higher by 7 per cent in FY20 and 20 per cent in FY21than the Bloomberg consensus estimates.Of the 13 per cent target price increase, 9 per cent is driven by higher value for the telecom business and the remaining 4 per cent is driven by the roll forward of debt.
We have rolled forward from FY20 to FY21 for the energy business valuation; however, there is no material change in EV of the energy business, the report said.Goldman Sachs said that complex refiners will be the biggest beneficiary of IMO 2020 regulations and RIL with the highest refining complexity is well positioned to benefit from it.The brokerage expects GRMs for Reliance Industries to rise sharply from last quarters level of $9.4 a barrel to its FY21 forecast of $14.5/barrel.