On Thursday, RIL ended lower for the fourth consecutive session, down 3.4 per cent at Rs 1,255, after foreign brokerages downgraded the stock. The company has seen a market-cap erosion of Rs 96,288 crore during this period. RIL's market-cap stood at Rs 8.91 trillion on May 3, 2019. Earlier on January 10, 2019, TCS had m-cap of Rs 7.08 trillion and RIL of Rs 7 trillion on closing basis.
Brokerage downgrade hits RIL
Analysts at Morgan Stanley have downgraded the stock to 'equal-weight' with a price target of Rs 1,349. They expect RIL's two-year earnings upswing to reverse.
"Investors are dismissing refining headwinds amid tighter crude markets.
A rising glut in the gas and polyester markets
could also slow growth into 2020. Upside appears limited amid core business drags, with no material capacity adds,” the brokerage firm said in a note.
"Downside earnings surprises in the energy business should unfold and attract increasing investor attention – a complete reversal in narrative after the positive triggers that played out since 2017. While the potential upside from digital investments could however offer structural upside as RIL rolls out new businesses, the cyclical headwinds in energy lead us to downgrade RIL to equal-weight (EW)" it added. The brokerage firm has a price target price of Rs 1,349.
Analysts at Jefferies also have ‘underperform’ rating on RIL with 12-month target price of Rs 990 per share on concerns of uncertain free cash flow (FCF), energy margins at risk and ROCE also mediocre.
“With its priorities now different and segment EBITDA negative, RIL has been retreating from US shale having already written off half of its $9.5 billion spend. Indeed, shale would cost RIL $5 billion in net cash flow too if it could divest residual assets at the $2.3bn carrying value but Pioneer's Eagle Ford sale suggests that this may be too optimistic. Data, hopefully, is not the new oil but expectations are lofty at around $100 billion in implied Telecom/Retail EV,” the brokerage firm said in report dated May 8, 2019.