FMP
Seizing the Opportunity: Goldman Sachs Bullish on Reliance Industries Amidst Recent Market Stagnation
May 28, 2024 10:41 AM - Parth Sanghvi
Image credit: Dylan Calluy
Reliance Industries (NSE) Limited (RIL) has been experiencing a period of stagnation in its share performance, despite strong rallies in various sectors earlier this year. Goldman Sachs (NYSE) analysis reveals that RIL's current discount to its net asset value (NAV) is at its widest since January 2021, largely attributed to factors such as declining Singapore refining margins and a slight earnings miss in the fourth quarter.
However, Goldman Sachs remains optimistic about the future prospects of RIL and sees several positive catalysts that could propel its shares higher in the near term.
Key Insights from Goldman Sachs' Analysis:
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Oil-to-Chemical Segment Potential: The investment bank is bullish on medium-term earnings from RIL's oil-to-chemical segment, expecting a rebound despite recent refining margin dips. Tightening global refining supply-demand dynamics and delayed peak oil demand forecasts contribute to this positive outlook.
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Improving Petchem Margins: Goldman Sachs anticipates improved petrochemical margins driven by higher oil prices, the conclusion of global demand destocking, and favorable feedstock costs from lower US gas prices.
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Consumer Return on Capital Invested (CROCI) Growth: RIL's CROCI is projected to witness substantial growth, reaching its highest level since 2011 by FY27. Factors contributing to this growth include anticipated telecom tariff hikes, increased retail same-store sales growth, and declining capital expenditure intensity in both the telecom and retail sectors.
Amidst these positive indicators, investors are presented with an opportune moment to capitalize on RIL's potential. As RIL gears up for future growth, now is the time to consider investing in the company.
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