Reliance Industries (RIL) shares have soared 10 per cent in the last one month amid extreme market volatility. Analysts at Morgan Stanley remain bullish and have put an ‘overweight’ call on the stock with a target price at Rs 3,253 per share, implying an upside of 17 per cent from June 6 closing price. The international brokerage firm believes that RIL’s energy vertical is on track to deliver its best quarterly performance in more than 20 years. It noted that the petrochemicals margins, despite lockdowns in China, are up on a quarter-on-quarter (QoQ). RIL shares were trading flat on Tuesday at Rs 2,779 on BSE.
Margins to be higher
“RIL’s fuel refining margins are tracking at $17 per barrel, i.e., 2x above mid-cycle,” it said. Globally, Morgan Stanley expects a shortage of one refinery annually for the next few years. Analysts said in the report, “If we were to include arbitrage crude advantages, which RIL highlighted earlier, margins would be even higher, and 50 per cent above their last peak seen in mid-2008, despite higher fuel and oil loss, official selling price (OSP) and gas costs.”
Collaboration with two-wheeler aggregators, OEMs to help RIL roll out its network efficiently
Analysts also noted that RIL tied up with Swiggy, Bluesmart, TVS, Mahindra, MG Motor India and Castrol to install EV charging stations in India for two-wheelers and four-wheelers. They believe that Reliance Industries’ focus on two-wheeler aggregators is a step in the right direction. “Overall, RIL’s approach to focus on two-wheeler aggregators (since two wheelers accounts for nearly 60% of the fuel consumption currently) with the likes of Swiggy and OEMs like TVS, should help it roll out its network more efficiently and reduce the fuel station network station handicap it has vs the top-three fuel retailers.
Note that RIL has 1400 stations while the top three players have over 56000 stations. According to the Morgan Stanley report, these collaborations will help integrate the four gigafactories and provide a low carbon solution on a direct B2C basis as well.
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