If you are planning to book profits in Reliance Industries (RIL) which has already rallied over 40 percent so far in the year 2017 and by about 50 percent from the launch of Jio you should wait for some more time as the counter may well head towards Rs 1,800 in next 12 months.
Better-than-expected earnings for the quarter ended June and launch of JioPhone and other services are likely to drive the next leg of the rally for the oil & gas major, suggest experts.
Investors, who are already invested in RIL, should continue with their long positions as there is limited downside while for those who are planning to add fresh positions can wait for a decline up to Rs 1,420-1,460, they say.
The June quarter results were better than analysts’ estimates which were led by strong refining and petrochemicals margins. Gross refining margin for the quarter grew by 3.5 percent to a 9-year high of USD 11.9 a barrel against USD 11.50 a barrel on a sequential basis.
The Q1 results pushed RIL to fresh 9-year high. The company has performed on all growth and profitability parameters across petrochemical, telecom, and retail divisions.
But, the trend might be slowly switching towards telecom and retail which will lead the next leg of growth for Reliance Industries as indicated by Mukesh Ambani, Chairman, RIL in 40th AGM.
The key highlight of RIL’s 40th AGM was the aggressive expansion of Jio through a) launch of Volte phone free of cost, and b) market leading rates for data/television services on JIO and, c) the fast-growing technological additions to JIO.
“The company is changing gear on telecom and retail business with growth across top line and bottom line and we believe that the next set of positive surprises on profit numbers will be visible from these two divisions over next 12 months,” Nikhil Khandelwal, MD, Systematix Shares told Moneycontrol.
"Investors should continue to maintain longs or enter into new long positions in Reliance. We have a target of Rs 1,800 on the stock from 12 months perspective," he said.
Meanwhile, Abhijeet Bora, Research Analyst, Oil & Gas, Sharekhan advises investors to stay invested in Reliance Industries for the long term to benefit from earnings growth from commissioning of downstream projects and likely value creation from telecom venture.
“We have a price target of Rs 1,665 on Reliance Industries," he said.
Bonus issue good for investor sentiment
Reliance Industries in its 40th Annual General Meeting (AGM) in Mumbai, announced a bonus issue of 1:1. This means that shareholders will get 1 bonus share for every one share held by an investor.
Well, this is the largest bonus issue in the country. Historically speaking, the company had previously announced a bonus issue prior to this in the years of 2009, 1997 and 1983.
"The predatory strategy to capture telecom space is quite aggressive and highly disruptive. The bargaining power that the company will enjoy once the competition is marginalized would be immense which is good for the investors in their long-term wealth creation journey," Jimeet Modi, CEO, SAMCO Securities told Moneycontrol.
"It is a great opportunity for Reliance investors to enjoy the telecom wave plus the added 1:1 bonus advantage in the short term. One man’s gain is other’s loss is the reality in the telecom space," he said.
Technical Outlook
The counter has rallied more than 5 percent in the last two weeks and the patterns on the weekly charts are looking indecisive. Added to this, last few days of price behaviour suggests that RIL could see some consolidation or mild correction.
“As this energy giant has completely underperformed for a considerable period of time and a late entrant in this bull market with a massive breakout above its 8-year-old triangular formation, long term trends are very attractively placed,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Hence, any decent correction should be considered only as a buying opportunity. If this counter is available in the zone of Rs 1,460–Rs 1,427 one should pick it up for a one year target of Rs1,649,” he said.
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