RIL has already begun work on JioGigaFiber which will further help Jio to expand its presence across the country. During the quarter, RIL also announced plans to de-merge its fiber and tower business so as to monetise its segment assets. Considering that a significant amount of debt was utilised for building the Jio infrastructure, creation of separate entities will enable RIL to de-leverage its balance sheet by moving the debt to the new entities.
“RIL has been performing steadily due to its major businesses refining and petrochemicals and we remain optimistic about these segments due to the ramp-up of the Refinery Off-Gas Cracker (ROGC) cracker, its downstream units and its Px plant which will help to produce high value polymer derivatives from low-cost fossil fuels resulting in better margins,” analysts at KRChoksey Shares and Securities said in result update.
In addition, the implementation of IMO 2020 norms will also prove to be a key positive trigger for refining earnings growth. The recently lower crude prices will further help in improved operating margins. As for the telecom segment, we see bright prospects on the back of strong subscriber addition through aggressive strategy, stable average revenue per user (ARPUs) and the implementation of Jio GigaFiber, it added. The brokerage firm maintains ‘buy’ rating on the stock and target price of Rs 1,442 per share.
Analysts at JP Morgan, however, have ‘neutral’ rating on RIL as the brokerage firm believes the core business segments of refining and petchem earnings environment could stall in the near term and the next leg of catalysts (IMO 2020, Pet Coke Gasifer) is still some quarters away.In petchem, incremental volume growth is limited from here and polyester spreads could come off. While RIL remains confident of IMO 2020 implementation, and the potential uplift to diesel cracks and overall complex refining margins, it is still six quarters away.
In the near term, 2019 refining capacity addition per RIL should be 1.5mbpd vs. demand growth of 1.4mbpd, and continued tight oil market should weigh on RIL’s refining earnings, offsetting benefits from a weaker INR. In our view, Jio's large subscriber addition has been supported by paperless KYC which, post the recent Supreme Court order on Aadhar, could become difficult and thereby slow down the entire industry's subscriber addition trajectory. Given that we do not expect any near term increase in telecom tariffs. The stock performance should broadly track the markets, the brokerage firm said in report dated January 18, 2019. Shares were trading above brokerage target price of Rs 1,100 per share.
At 02:41 pm, RIL was trading 1.8 per cent higher at Rs 1,314 on the BSE, as compared to a 0.92 per cent rise in the S&P BSE Sensex. A combined 8.18 million equity shares changed hands on the counter on the NSE and BSE so far.