Buy RIL, Bharti Airtel: CLSA sees up to 26% rally in these stocks; consult the 2021 growth outlook, target prices

Indian stock market benchmarks BSE Sensex and Nifty 50 traded with minor cuts on Thursday, mostly dragged down by the sell-off of IT stocks. Index heavyweight Reliance Industries Ltd (RIL) was trading over half a percent, capping the index’s losses. As Bharti Airtel shares were trading flat in today’s weak session. Research and brokerage firm CLSA is bullish on RIL and Bharti Airtel stocks with outperformance and a buy rating, respectively. He believes that the rise of broadband, the growing dominance of telecommunications, and a resumption of gas production may not be immediate surprises, but could strengthen RIL’s long-term promise. While the brokerage firm favors Bharti Airtel, its market share performance in 2020 was commendable.

Jio and Reliance Retail listing may not be in 2021

It will take RIL to jump 16 percent from the previous close to reach the target price of Rs 2,250 coin indexed by CLSA. In the new year 2021, the research firm expects major steps from RIL to improve its omnichannel offerings through JioMart, bolstering the technology strategy by showcasing 5G readiness and improving content applications. CLSA is concerned about downward EPS revisions for the telecoms oil major, as about 70% of the 84% two-year EPS growth comes from uncertain telecom rate hikes and a rebound in refining margin. It maintained its “outperform” rating for RIL stock despite high expectations and overhanging earnings.

Stock quotes for its Jio platforms and Reliance Retail Venture Ltd may not take place this year. The CLSA noted that any progress on a sale of an equity interest in a downstream company may not result in a significant increase in value from current levels. Clever consensus earnings estimates indicate that 40 percent of Nifty’s additional revenue comes from Reliance Industries Ltd despite its much lower 11 percent weight. “A review of 47 percent EPS growth in fiscal 22CL for Reliance indicates that tariff increases for Jio and gains in refining are driving the company’s profit growth,” he said. he noted. He believes that a steady addition of subscribers should continue throughout the year for Reliance Jio.

Bharti Airtel has solid growth prospects, compelling valuation

A rally of 26.24% will be required for Bharti Airtel stock to reach the price target of Rs 730 predicted by the brokerage company. In 2021, Airtel will maintain its market share thanks to a 35% growth in data subscribers, but with a winning execution, it is seeing its forecast up. Even though Airtel stock disappointed in 2020 due to the negative AGR verdict, its market share performance was commendable. In the event that AGR relief is granted to Airtel, this would increase the fair value of its inventory. “We take into account a tariff increase of 25 percent on fiscal years 21-23CL, which boosts the consolidated Ebitda Cagr to 16 percent of Bharti Airtel and a valuation of 7x EV / Ebitda.