Shares of Reliance Industries Ltd (RIL) were in focus today after the government imposed taxes on export of petrol, diesel and jet fuel (ATF) shipped overseas by Indian firms on Friday. It also levied taxes on windfall gains made by crude oil producers.
RIL stock ended 7.14 per cent or Rs 185 lower at Rs 2,408 on Friday. RIL shares plunged 8.66 per cent intraday to Rs 2,369.45 in the previous session.
However, the effect of new taxes was mild in today’s trading session. RIL stock was trading 0.17 per cent higher at Rs 2,413 on BSE. Reliance Industries is trading lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
RIL share has gained 13.61 per cent in one year and risen 2.15 per cent since the beginning of this year. Total 2.56 lakh shares of the firm changed hands amounting to a turnover of Rs 61.67 crore on BSE.
Market cap of the conglomerate stood at Rs 16.32 lakh crore. The share hit a 52-week high of Rs 2,855 on April 29, 2022 and a 52-week low of Rs 2, 016 on July 28, 2021.
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How brokerages and analysts expect the stock to move
Goldman Sachs has given a buy call on the stock with a target price of Rs 3,240.
“This compares to spot implied gross refining margins (GRM) run rate of US$27/bbl & consensus implied FY23 GRM estimate of US$17/bbl & US$14/bbl, respectively,” said Goldman Sachs said. It sees every US$1/bbl change in GRM impact FY23E/24E EBITDA by 3 per cent.
Morgan Stanley is overweight on the stock with a target price of Rs 3,253. July 1 regulations imply a permanent $6-7/bbl lower refinery margin for RIL. With the government looking to review every fortnight, RIL can sustain refinery margins at $15/bbl or above, it said. Even $15/bbl GRM would imply earnings upgrades, the brokerage added.
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Jefferies has given a buy call on the RIL stock. However, the target price has been cut to Rs 2,900 from Rs 2,950 after the imposition of taxes. The government’s unprecedented move to tax diesel & gasoline exports is designed to cap refining profits of private refiners such as RIL, the brokerage said. It sees a 4 per cent fall in RIL’s FY23E EBITDA and expects gross refining margins to come at $13/bbl .
Manoj Dalmia, Founder and Director, Proficient Equities said, “These taxes might reduce the revenue being generated from the exports side. Reliance imported about 1.4 million barrels per day of oil in May of cheap crude and also, they have increased imports from Russia where they are getting crude at a lesser price. The overall impact will neutralize, now this depends on the price at which the inventory has been accumulated and the overall cost being incurred. Considering the worst case, we might either see a flat growth in margins or little higher margins if they have enough cheap crude resource and are working on cost optimisation.”
Mohit Nigam, Head, PMS, Hem Securities said, “Reliance Industries has generated around Rs 1.45 lakh crore revenue from exports in year 2020-21. In Europe, 95 per cent of the petroleum products are supplied by Reliance Industries. These taxes will impact the profitability of Reliance going forward as the company has attracted huge gains from rising international oil prices. The windfall taxes were imposed in various European nations to generate additional revenue for the govt. Currently, Reliance is trading below 200 Double Exponential Moving Average (DEMA) with immediate support in the range of Rs 2,250-Rs 2,300. We believe investors should accumulate the stock with a long-term view.”
AR Ramachandran, Co-founder and Trainer, Tips2Trades said, “While the recent levy of taxes on petroleum products will surely impact Reliance and other OEM companies, Friday’s sharp fall has factored the margin hit to be taken by Reliance in the coming quarter. Technically, Rs 2,340-2,360 now remains a strong support zone to start accumulating for longer-termThe market targets of Rs 2,900- Rs 3,050 in the coming months. Rs 2,470 will act as a strong resistance next week.”
JM Financial kept the price target of RIL stock unchanged at Rs 3,000.
“Govt announced windfall tax on all refiners (including SEZ refineries) on export of diesel, petrol and ATF at the rate of Rs 13/ltr on diesel and Rs 6/ltr on petrol and ATF. The likely hit on RIL’s GRM could be USD 7-8/bbl and hit to EBITDA could be Rs 300 billion -310 billion on an annualised basis. However, our FY23-24 estimate and target price of Rs 3,000 remains unchanged as we were conservatively factoring RIL’s GRM at only $12.5/bbl in FY23 (and $11.0/bbl in FY24). However, we agree this might end the likely earnings upgrade cycle that the street was expecting if the current high refining margin was to sustain. Further, this could pose risk to RIL’s earnings if the govt delays reversal of this cess despite moderation of GRMs to $10-15/bbl (from current high USD 20-25/bbl). Finance Minister said they will review the situation every 15 days and should get reversed as oil prices normalise.”
ICICI Direct has given a target price of Rs 2,800 per share.
“Long term prospects and dominant standing of RIL in each of its product & service portfolio, provide comfort for long term value creation. RIL’s consumer business will be the growth driver, going ahead. The company has a strong balance sheet while its traditional business will continue to generate steady cash flows amid a favourable global scenario. We maintain our BUY rating on the stock. On an SOTP basis, we value the stock at Rs 2800 per share.”