Oct. 16--MUMBAI -- A day after oil-to-yarn and retail conglomerate Reliance Industries Ltd (RIL) announced its September quarter earnings, at least four leading brokerages on Tuesday upgraded the price target on the company's stock.
Goldman Sachs revised the target from Rs.1,140 to Rs.1,170 per share; ICICI Securities Ltd from Rs.1,068 to Rs.1,122; Deutsche Bank from Rs.1,040 to Rs.1,060; and J.P. Morgan from Rs.800 earlier to Rs.1,000.
J.P. Morgan also re-rated RIL's stock to "overweight" from "neutral" earlier. Helped primarily by a rupee that depreciated around 11% against the dollar between July and September and better margins in the petrochemicals business, RIL's revenues in the September quarter crossed the Rs.1 trillion mark (at Rs.1.04 trillion, 15% higher year-on-year). Its net profit grew marginally by 1.5% year-on-year to Rs.5,490 crore.
While net profit was higher only marginally due to lower margins in the refining business, higher depreciation and lower other income, analysts are happy that the contribution of other income to the bottomline has come down over the April-June quarter. Over the last couple of years, analysts had spoken of their concern that RIL's net profit was being driven more by treasury income on the spare cash on its books, and less by operating businesses.
But in the September quarter, other income was down 19% sequentially at Rs.2,060 crore.
"While (the results were) in line, this masks strong core operational performance with Ebitda (earnings before interest, tax, depreciation and amortization) up 11% quarter-on-quarter and 6% ahead of our forecast helped by strong petrochemicals and refining performance," said a report by Barclays Capital on Tuesday.
Analysts are also slightly more positive about the oil-to-yarn and retail conglomerate's upstream oil and gas exploration and production business. A Tuesday report by Macquarie Capital Securities India (Pvt.) Ltd said the volume of gas production from the D6 reservoir in the Krishna Godavari basin, which has been on a constant decline, was likely to bottom out by the third quarter of fiscal 2014 and rise thereafter.
"KG-D6 volumes may bottom as early as the next quarter, as workover operations and fresh wells at existing fields could contain the decline," it said.
Another report by Credit Suisse noted that capacity expansion in petrochemicals would be one of the key drivers of the company's future earnings, with operating profit expected to grow 20% each year between fiscal 2014 and 2017.
RIL lost 0.41% to close at Rs.866.70 a share on Tuesday on BSE, while the bourse's benchmark index, Sensex, lost 0.29% to close at 20,547.62 points and the BSE Oil and Gas Index fell 0.39% to 8,521.51 points.