Morgan Stanley the FII Mover & shaker of Indian Market has
Upgraded Reliance Industries Ltd from Underweight to Overweight - A Double Upgrade.
RIL is spending US$15.5bn on four downstream projects; MS projects they will add ~US$3.1bn in EBITDA.
RIL has 1400 dormant outlets which were shut for ~7 years due to losses related to fuel subsidies. We had earlier written them off, but they are finally to become operational in coming months.
After eight years of dragging on consolidated profits,
reliance retail business is PATpositive. Peak capex is behind; focus is on building the business and lifting profitability. A possible foray into eCommerce could further strengthen the business case
RIL has invested ~20% of its capital employed in telecoms. This has been our biggest concern – the business has a long gestation
period for profitability. However, the launch is nearing, the regulatory environment has improved; spectrum auction bidding was rational, and the 4G ecosystem is improving. All indicate a better business case
FII under-ownership is at a five-year high. With higher confidence in F17e earnings, P/E is 9x and P/B is 1.x – near 10 year trough.
Morgan has set a Stock Target Price of Rs 1062 for Reliance Industries Ltd
