Rebalancing refining market, faster asset monetisation to drive RIL upside: Morgan Stanley

New Delhi: Reliance Industries’ faster asset monetisation, together with the rebalancing of oil refining market and cheaper feedstock, could help drive upside in company’s price-to-earnings (PE) ratio, Morgan Stanley said in a report.

Including Reliance Industries (RIL) in its ‘Three in Three’ report for Asia Pacific, the brokerage firm upgraded the company stock to ‘overweight’. The other two to feature in the August 18 report were Ping An Bank and NTT Docomo.

“RIL has corrected 12 per cent in three months as both refining and chemical industry margins hit cash cost (or operational cost),” Morgan Stanley said in the research report. This was primarily due to weakness in refining margins and spreads in key chemicals. Also, RIL’s telecom per user revenue has corrected in the last quarter.

The refining market is rebalancing, cheaper ethane feedstock could drive upside in PE, and faster asset monetisation could surprise, it said. “P/B (price-to-book) valuations are near 20-year average on below mid-cycle margins – compelling, in our view, as supply-side rebalancing helps refining markets improve, significant fall in costs of feedstock like ethane reduces challenges for RIL’s petrochemical division, and downside risks ease in the aromatic value chain,” it said.

RIL’s announcement at its annual general meeting last week also provided a path to deliver the balance sheet (debt/liabilities account for a third of RIL’s enterprise value). “This should address investor concern about the balance sheet,” it said.

RIL announced USD 16 billion in energy asset sales during the AGM. It also highlighted a plan to lower debt by monetising fiber infrastructure assets. “Overall, committed asset sales account for about 38 per cent of RIL’s net debt plus liabilities,” it said.

Other takeaways from the AGM were the end of the investment cycle in telecom – a first in five years, bringing debt to zero in 18 months, value-unlocking options for real estate and financial assets, listing of telecom and retail in five years, and focus on dividends.

RIL announced agreeing to a non-binding letter of intent from Saudi Aramco regarding proposed investment in its refining, petrochemicals, and fuel marketing business. It plans to sell a 20 per cent stake at an enterprise value of USD 75 billion. At the same time, it will source 500,000 barrels per day of oil (about 36 per cent of its total requirements) from Saudi Aramco.

“Once completed, we estimate the stake sale will make RIL’s energy business nearly debt-free, but it will lower RIL’s FY21 consolidated earnings by 9 per cent and operating cashflow by 14 per cent,” Morgan Stanley said. The Aramco deal is expected to close this fiscal.

“We upgrade RIL to overweight after the near 12 per cent decline in the past three months and 8-10 per cent cut in earnings expectations for FY20 and FY21,” it said. “We believe the expectations are a lot more moderated, and with both refining and petrochemical industry margins touching cash cost quite quickly in the past quarter, the downside risks are now well flagged.”

While the recovery in energy margins will be slow (especially against the backdrop of weak global demand), there will be support from slowing supply growth in polyethylene and refining. Also, monetisation of energy assets (fuel retail to BP and oil to chemicals to Saudi Aramco), coupled with the announcement of an end to the investment cycle in telecom, should help deliver the balance sheet after nearly seven years, it said.

“RIL has highlighted plans to go to zero debt by end-F21, but we saw announcements that could lower debt/liabilities by a third and await more details on its future plans,” it said. “We raise our FY21 and FY22 earnings estimates and maintain our price target of Rs 1,349 per share, implying 16 per cent upside.”



  1. Pingback: 카지노사이트

  2. Pingback: market research company Toronto

  3. Pingback: guaranteed ppc reviews

  4. Pingback: 메이저바카라

  5. Pingback: How To Use Wealthy Affiliate 2020

  6. Pingback: สินเชื่อ สุรินทร์

  7. Pingback: noob replica

  8. Pingback: Pick and mix sweets

  9. Pingback: Skylar

  10. Pingback: 밤토끼시즌2

  11. Pingback:

  12. Pingback: anonymous

  13. Pingback: Kitchen Cabinet Installation

  14. Pingback: DARK HAWK CARTS / BUY HERE

  15. Pingback: Marijuana

  16. Pingback: good cheap dumps

  17. Pingback: realtor

  18. Pingback: nova88

  19. Pingback: สล็อตเว็บตรง

  20. Pingback: chiappa rhino 60ds

  21. Pingback: passive income 2022

  22. Pingback: sbobet

  23. Pingback: สล็อตเว็บตรง

  24. Pingback: read this article

  25. Pingback: สินเชื่อโฉนดที่ดิน

  26. Pingback: Your Domain Name

  27. Pingback: สร้างเว็บไซต์

  28. Pingback: แทงบอล

  29. Pingback: top rated car transport companies

Leave a Reply

Your email address will not be published.

15 − 2 =

News is information about current events. News is provided through many different media: word of mouth, printing, postal systems, broadcasting, electronic communication, and also on the testimony of observers and witnesses to events. It is also used as a platform to manufacture opinion for the population.

Contact Info

D 601  Riddhi Sidhi CHSL
Unnant Nagar Road 2
Kamaraj Nagar, Goreagaon West
Mumbai 400062 .

Email Id: [email protected]

West Bengal

Eastern Regional Office
Indsamachar Digital Media
Siddha Gibson 1,
Gibson Lane, 1st floor, R. No. 114,
Kolkata – 700069.
West Bengal.

Office Address

251 B-Wing,First Floor,
Orchard Corporate Park, Royal Palms,
Arey Road, Goreagon East,
Mumbai – 400065.

Download Our Mobile App

IndSamachar Android App IndSamachar IOS App
To Top
WhatsApp WhatsApp us