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Probal Sen believes that earnings growth for ONGC and Reliance will continue to be strong. Reliance, with its multiple growth levers from retail and telecom, is expected to have a 15% CAGR in EPS over the next three years. ONGC's production growth is becoming a reality after a lag, and realisations for both oil and gas remain high.
Reliance Q3 numbers were fairly strong with performance in several segments offsetting weakness in the gas exploration and O2C segments. Net debt continues to rise despite declining capex. Retail showed a 23% YoY growth in revenue and a 30% improvement in EBITDA, but return ratios remain below 10% due to increased capital allocation. Optimism remains for Jio's ARPUs with traction expected from enterprise and fiber to home business, 5G investments, and tariff monetization. Stock price outlook is neutral with a fair price of Rs 2600-2700.
“We currently have an add rating on Reliance with a target price of around Rs 2,650 odd. But we will definitely review the numbers and look at what the management has to say about their business outlook and new energy businesses and then take a call on what the stock looks like from here.”
According to a poll of 12 experts from brokerages and rating agencies, retail prices of petrol and diesel in India are expected to remain in the current range.
With fears of a global slowdown impacting exports, India’s ability to continue as one of the top exporters of fuel, especially to newer markets like the US and Europe, would be a key factor in limiting the country’s widening trade gap.