Technically, RIL (CMP:931) has to break & sustain over 945-965 zone for an immediate to short term target of 985-1001 & 1020-1041-1065 zone. Consecutive closing above 1041, it may scale 1100-1150 area in the mid term. In the long term, only sustain above 1150, RIL may target 1280-1650 zone under the bullish market scenario (FY:16-18).
On the downside, inability to sustain over 945, it may fall to 926-915 zone immediately and sustain below 915, RIL may again fall to 905-899-888-870 area. Consecutive closing below 870, RIL may further fall to 852-840-828-801-796-763 territory in worst bear case scenario.
In short, 945-965 might be strong supply (resistance) zone & 888-870 may offer strong demand (support) zone in the near term.
Bottom Line: Technical Trading Levels (Positional)
| SL</>5 | FROM SLR | |||||||||
| RIL | CMP | 931 | ||||||||
| T1 | T2 | T3 | T4 | T5 | T6 | T7 | SLR | |||
| Strong > | 945 | 965* | 985 | 1001 | 1020 | 1041* | 1100 | 1150 | <935 | |
| Weak < | 935 | 915* | 905-899 | 888 | 870* | 852 | 840 | 828-796 | >945 | |
RIL rallied sharply for the last few days after its AGM, which give clarity about its 4G launch & overall operation structure besides its core business of Petrochem & refinery. There is market talk that R-Jo's ARPU may beat the street estimates amid its various strategies & services.
As par quick BG metrics, current median valuation of RIL may be around 1100 & its projected fair value may be around 1240-1300-1500 (Standalone basis without R-JIO negative earnings for FY:16-18).
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | LONG TERM | SHORT TERM | MEDIAN VALUE | 200-DEMA | 10-DEMA |
| RELIANCE | 80.1 | 614.91 | 17.02 | 1110.75 | 1107.18 | 1108.97 | 904.99 | 899.17 |
| RELIANCE | 100 | 842 | 17.02 | 1241.09 | 1237.09 | 1239.09 | 904.99 | 899.17 |
| RELIANCE | 124.1 | 1135 | 17.02 | 1382.57 | 1378.12 | 1380.34 | 904.99 | 899.17 |
| RELIANCE | 150 | 1532 | 17.02 | 1520.01 | 1515.12 | 1517.57 | 904.99 | 899.17 |
As par various analyst's view, core business (E&P) of RIL will balance R-Jio's overhang for the next 3-5 years till R-Jio break even. But considering the likely big bang launch of its 4G operations on 28-th Dec (Also B'day of founder Dhiru Bhai Ambani) along with various aggressive strategy to grab the telecom market share in a short span of time, analysts might review their calculation. Although there is no concern on data service, challenges may be single digit ROE of telecom industries and 4G voice calling technology on LTE.
As par SOTP, fair value of RIL may be around 1140 (FY-16) :
| SUM-OF-THE PARTS VALUE - FY16 | |
| Rs/per share | |
| Downstream NAV | 1,113 |
| Domestic upstream NAV | 111 |
| International upstream - Shale gas NAV | 47 |
| Diversification: | 96 |
| Broadband | -49 |
| Organised retail | 48 |
| Others | 97 |
| Treasury stock | 57 |
| SOTP NAV | 1,425 |
| Less: discount due to telecoms | 285 |
| Target price | 1,140 |
NAV is net asset value
Source: Macquarie Research/BS
| IMPROVING PROFITABILITY | |||
| FY16E | FY17E | FY18E | |
| Revenues (Rs crore) | 3,09,400 | 3,80,000 | 4,28,000 |
| % change y-o-y | -17.6 | 22.8 | 12.6 |
| Net profit (Rs crore) | 24,100 | 26,200 | 34,600 |
| % change y-o-y | 2.1 | 8.7 | 32.1 |
| EPS (Rs) | 74.3 | 81.0 | 107.0 |
| Return on Equity (%) | 10.6 | 10.6 | 12.8 |
| Return on Capital Employed (%) | 6.1 | 6.3 | 8.3 |
E: Estimates
Source: Company, Barclays Research/BS
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