Brokerages Retain Bullish Calls on RIL Despite Surprise Tax on Oil Exports

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Brokerages Retain Bullish Calls on RIL Despite Surprise Tax on Oil Exports

By Malvika Gurung

Investing.com -- The oil-to-telecom conglomerate Reliance (NS: RELI ) Industries’ shares performed well, rising in the session on Monday after recording its worst single-day decline in 19 months on Friday.

Shares of the country’s most valuable company by market capitalization plummeted over 7% in the previous session, as the Government imposed special additional export taxes on petrol, ATF and diesel, along with a windfall tax charged on the gains of domestic refineries, given global crude oil prices jumping to eight-year peaks, in a surprise move on Friday.

Read Also: Key Oil Refiners Crash Up to 15% on Export Tax Hike on Fuel, Fears Loom

The development will negatively impact domestic oil refining and marketing companies, as it is likely to dent refiners’ earnings.

However, global brokerage Morgan Stanley (NYSE: MS ) has exuded confidence in RIL, stating that the company is well-placed to deal with the government's surprise tax move on the export of petroleum products.

The company’s shares gained 1.4% post the brokerage’s call.

It believes that despite the tax implication, a mid-cycle margin is achievable for the heavyweight, and expects it to sustain a refinery margin of at least $15/barrel despite the tax.

Even a $15/barrel GRM will mean earnings upgrades for the company. MS has an ‘overweight’ rating on RIL, and a target price at Rs 3,253, an upside of 34.8% compared to Monday’s close.

Goldman Sachs (NYSE: GS ) and Jefferies have maintained their Buy calls despite the tax imposition, seeing up to 34% upside.

Read Also: ONGC (NS: ONGC ) FreeFall Extends - Tanks 4.4% As Brokerages Cut Estimates & Downgrade Rating

Read Also: Centre Hikes Export Taxes on Fuel, Windfall Tax on Crude; Which OMCs Exempted?

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