Goldman Sachs Backs Reliance As King Of Oil Refiners, Shares Hit Record High

Reliance Industries’ share price shot up on Thursday to hit an all-time high amid strong trading volumes after Goldman Sachs reaffirmed its bullish stance on the stock, differentiating it from other oil stocks that were downgraded.

What Happened: Goldman Sachs reiterated its “buy” rating based on Reliance Industries’ exposure to growing consumer and tech businesses, combined with a robust oil-to-chemical business. Goldman Sachs adjusted its 12-month price target for Reliance Industries to ₹2,885, up from ₹2,660.

However, Goldman Sachs lowered its EBITDA forecasts for fiscal years FY24, FY25, and FY26 by 2%, 3% and 4%, respectively. The adjustments considered updated projections for refining and chemical margins, and reduced telecom earnings estimates due to delayed tariff hike assumptions, among other things.

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Despite the downward revisions in earnings estimates, the overall target price for RIL increased by 8%, the brokerage said thanks to brighter prospects for the consumer businesses offsetting the impact of lowered earnings estimates, Goldman Sachs added.

Standout Among Peers: Meanwhile, Goldman Sachs adjusted its outlook for other oil stocks, stating that the risk-reward is less favorable for ONGC, Indian Oil and Bharat Petroleum after their recent rally. As a result, Goldman Sachs downgraded the ratings for these three stocks.

ONGC was downgraded to “sell” from “neutral” with a revised target price of ₹175, Indian Oil to “sell” from “neutral” with a revised target price of ₹105 and BPCL to “neutral” from “buy” with a target price of ₹500.

Goldman Sachs cited windfall taxes on crude oil and a domestic gas price cap as factors limiting upside potential for ONGC’s earnings. For Indian OMCs, it pointed out that share prices have surged ahead of fundamentals, and there is limited potential for upside in marketing margins as oil prices remain relatively high.

Price Action: Reliance Industries’ share price climbed 2.58% to ₹2,718.45 in afternoon trade on Thursday, hitting a record high.

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Posted In: EquitiesUpgradesDowngradesMarketsAnalyst RatingsMoversTrading IdeasBPCLIndian OilONGCReliance