What’s next: This was the key investor question in the past two weeks after RIL’s 17% outperformance versus Sensex. While investor debate on telecom earnings and energy project execution may continue near term, we believe delivery of energy earnings will provide the next leg of stock performance, as it should boost earnings expectations and lift returns. Telecom’s drag on returns may reduce at the margin but is unlikely to halt overall growth in returns, as energy investments deliver on earnings growth steadily until FY20.
Interestingly, there was limited pushback to our telecom business valuation of 0.6x EV/IC.Most investors remain skeptical on timely project execution, as RIL had seen challenges in the past; we assume a 3-6 month delay as part of our base case, but medium-term commissioning of energy projects should help reduce concerns, in our view. Read More…
Credit By : Financialexpress.com
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