By Hritam Mukherjee
(Reuters) -Shares of India’s Reliance Industries jumped 4% on Monday as investors cheered strength in its telecom and retail businesses after a quarterly profit beat, prompting analysts to upgrade the stock after months of underperformance.
Over the last year, the billionaire Mukesh Ambani-led conglomerate has done worse than India’s benchmark Nifty 50 index, which Jefferies said was amid concerns of a slowdown in its retail business.
Analysts see the trend changing after Reliance beat fourth-quarter profit estimates, largely boosted by its retail and telecom units.
“Stock valuation has turned attractive,” Antique Broking said in a note. “The telecom outlook is robust with strong subscriber growth and another round of tariff hike over the next 12-15 months.”
Out of 32 analysts covering the stock, at least 13 hiked their price targets while a dozen upgraded their ratings, as per data compiled by LSEG.
Reliance’s shares rose as much as 4.4% to their highest since October and were the top percentage gainers on the Nifty, which was trading 1% higher. Reliance is the third-heaviest stock on the Nifty.
The company’s new energy plans, stable debt levels, strong retail growth and the expected unlocking of value from listings of Reliance Retail and telecom unit Jio are factors making the stock’s “re-rating imminent”, Systematix Research said.
Morgan Stanley sees the management’s confidence in retail growth and ramp-up of new energy business as key catalysts as the “earnings estimate downgrade cycle reverses.”
Nomura has Reliance as its “top pick” in the Indian energy sector.
Reliance’s mainstay oil-to-chemical segment makes up about 51% of its sales. Digital, which includes telecom, and retail contribute 13% and 28%, respectively.
(Reporting by Hritam Mukherjee in Bengaluru, additional reporting by Bharath Rajeswaran; Editing by Mrigank Dhaniwala)
