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Time of India
4 days ago
- Business
- Time of India
RIL earnings in next 2 years should be better than last 2: JPMorgan
With shares of Reliance Industries (RIL) having underperformed over the past year with just a 2% return, global brokerage firm Jefferies said on Thursday that the blue-chip stock has felt the pressure of large earnings cuts, but growth in the consumer business could drive a rally going Sanjay Mookim said RIL's earnings over the next two years should be better than in the previous two, as weaker commodity EBIT is unlikely to recur given the already low margins.'Consumer business growth should translate better to the bottom line, helping relative performance,' Mookim said in a report, assigning an Overweight rating with a target price of ₹1,568. The oil-to-chemicals (O2C) segment now accounts for only a third of RIL's consolidated EBITDA. JP Morgan noted that the drag from any margin weakness should be lower, and base effects are favorable for retail and telecom in H1/Q1FY26. This, it said, should support near-term earnings growth. 'In the short term, RIL's relative performance to the Nifty has tended to respond to Nifty relative EPS revisions. The unanticipated weakness in refining and petchem margins drove sharp earnings cuts in FY25—hurting stock performance, in our view,' the report stated. Reliance Retail and Jio now account for about 54% of RIL's total consolidated EBITDA in FY25. 'On our estimates, these two segments will account for almost all of the net EBITDA growth over the next three years. RIL has operated with materially negative free cash flow over the last three years, driven by telecom spending. As that fades, and with an EBITDA run rate of approximately $20 billion a year, we expect Reliance to generate positive free cash flow—despite elevated capex plans at the New Energy complex, in retail, and in petchem capacity expansions,' JP Morgan added. Recent company guidance of maintaining net debt to EBITDA below 1x also supports the outlook for positive free cash flow, the brokerage said. RIL shares rose nearly 2% following the brokerage report, touching an intraday high of ₹1,454.50 on the BSE.
Economic Times
4 days ago
- Business
- Economic Times
RIL earnings in next 2 years should be better than last 2: JPMorgan
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel With shares of Reliance Industries RIL ) having underperformed over the past year with just a 2% return, global brokerage firm Jefferies said on Thursday that the blue-chip stock has felt the pressure of large earnings cuts, but growth in the consumer business could drive a rally going Sanjay Mookim said RIL's earnings over the next two years should be better than in the previous two, as weaker commodity EBIT is unlikely to recur given the already low margins.'Consumer business growth should translate better to the bottom line, helping relative performance,' Mookim said in a report, assigning an Overweight rating with a target price of Rs 1, oil-to-chemicals (O2C) segment now accounts for only a third of RIL's consolidated EBITDA. JP Morgan noted that the drag from any margin weakness should be lower, and base effects are favorable for retail and telecom in H1/Q1FY26. This, it said, should support near-term earnings growth.'In the short term, RIL's relative performance to the Nifty has tended to respond to Nifty relative EPS revisions. The unanticipated weakness in refining and petchem margins drove sharp earnings cuts in FY25—hurting stock performance, in our view,' the report Retail and Jio now account for about 54% of RIL's total consolidated EBITDA in FY25.'On our estimates, these two segments will account for almost all of the net EBITDA growth over the next three years. RIL has operated with materially negative free cash flow over the last three years, driven by telecom spending. As that fades, and with an EBITDA run rate of approximately $20 billion a year, we expect Reliance to generate positive free cash flow—despite elevated capex plans at the New Energy complex, in retail, and in petchem capacity expansions,' JP Morgan company guidance of maintaining net debt to EBITDA below 1x also supports the outlook for positive free cash flow, the brokerage said. RIL shares rose nearly 2% following the brokerage report, touching an intraday high of Rs 1,454.50 on the BSE.
Mint
19-05-2025
- Business
- Mint
Emirates NBD Bank gets conditional nod from RBI to open local arm
Mumbai: The Reserve Bank of India (RBI) on Monday said it has decided to grant in-principle approval to Dubai-based Emirates NBD Bank PJSC to establish a wholly-owned arm in India. India allows foreign banks to operate either as a branch or wholly-owned subsidiary of the parent. All except two — DBS Bank India and SBM Bank India — work as branches. A local unit gives more flexibility to the bank than when operating as a branch. Also read: Before you borrow via a lending app, ask whether it's worth losing your privacy over? The RBI, in a statement, said that Emirates NBD Bank PJSC currently operates under the branch mode through its branches located in Chennai, Gurugram and Mumbai. In India, it reported a loan book of ₹4,641.6 crore as on 31 March 2024, per its latest available annual report, up from ₹3,417.2 crore in FY23. The group has operations in the United Arab Emirates, Egypt, Saudi Arabia, India, the UK, Turkey, Bahrain, Russia, Austria, Germany, Singapore and representative offices in China and Indonesia, as per its website. 'The in-principle approval has been granted to the bank for setting up a WOS (wholly owned subsidiary) through conversion of its existing branches in India," it said. According to RBI, it would consider granting a licence for commencement of banking business through the wholly-owned subsidiary mode to Emirates NBD Bank PJSC, on being satisfied that the bank has complied with the 'requisite conditions laid down by RBI as part of in-principle approval". Also read: JP Morgan's Mookim seeks bright spots amid earnings lull in Indian markets Interestingly, Emirates NBD was one of the suitors for private sector lender IDBI where the government and the Life Insurance Corp of India (LIC) want to sell 61% of their stake, per media reports. The Economic Times reported on 21 January that those interested in IDBI Bank include Fairfax Financial, Emirates NBD, Oaktree Capital and Kotak Mahindra Bank. The government and LIC collectively owned a 94.71% stake in IDBI Bank as on 31 March. In the past, the regulator has allowed the local arm of a foreign bank to take over a domestic lender. In November 2020, RBI had seized control of the struggling Lakshmi Vilas Bank (LVB) and forced a merger with the local unit of Singapore's largest lender DBS Bank. That was the first time the central bank had tapped a bank with a foreign parent to backstop an Indian rival. Also read: GN Bajpai: Tokenize real estate to open up an attractive asset class Foreign banks have found it an uphill task to penetrate meaningfully into India, barring a few areas. The difficultly has been more pronounced in retail operations, given the deep on-ground presence of Indian public sector and private banks. In fact, a clutch of foreign banks have exited certain businesses in India, the latest being Citibank which sold its consumer banking business for ₹11,603 crore to Axis Bank in 2023.
Mint
19-05-2025
- Business
- Mint
JP Morgan's Mookim seeks bright spots amid earnings lull in Indian markets
MUMBAI : Over the past 18-20 months, identifying large-cap top performers has been challenging amid elevated expectations and lacklustre earnings, according to Sanjay Mookim, head of India equity research at J.P. Morgan. Currently, only financial stocks appear attractive from a growth and valuation perspective, Mookim says, highlighting the scarcity of compelling opportunities in a market starved of earnings surprises. The latest earnings season has done little to lift enthusiasm, with few standout results emerging. Though the market rallied briefly following the recent India-Pakistan ceasefire, Mookim expects volatility to persist, fuelled by shifts in US trade policy and potential new trade deals. With GDP growth normalising and fiscal stimulus exhausted, Mookim describes the current phase as a 'bull market reset", one requiring selective stock picking amid ongoing uncertainty from global trade tensions and geopolitical developments. Edited excerpts: After a period of blockbuster economic growth and stock market returns in the last three to four years, what is your expectation for the economy and markets going forward? For the next three odd years, we are looking at a nominal gross domestic product (GDP) growth of 9-11% for the Indian economy. While we no longer have any room for further fiscal stimuli, there is some monetary policy support from the Reserve Bank of India (RBI). Even though we anticipate an overall 100 basis point cut in interest rates, favourable liquidity conditions need to persist for a period of time for that to have an impact on the economy. Also read | Five fundamentally strong stocks down nearly 40% in the past one year With GDP growth normalising after the post-covid boom, company earnings will also reflect a similar growth pattern. Hence, we can call it a bull market reset rather than a pause, where the breadth of the companies posting earnings growth will be narrower. Which sectors do you think will lead this 'reset" era? Right now, the task that lies ahead of us is to identify a set of top-down stocks within the large-cap segment or a theme where we are seeing earnings surprises. Ultimately, what works in stock picking is avoiding companies that will miss earnings expectations and buying those that will beat expectations. However, over the last 18-20 months, identifying top-performing stocks has been challenging due to elevated expectations and lacklustre results in the last three quarters. Currently, only financials look attractive from a growth-valuation perspective. Are current Q4 earnings offering enough positive surprises? So far, results have been lacklustre. We are seeing very few beats this quarter. While there have been a few that have delivered better-than-expected near-term quarterly earnings, changes to 12-month earnings projections matter more to stock prices. There have been relatively few instances where analysts have been required to increase forward numbers so far. What is the FPI sentiment regarding India right now? The consensus view on India is that it is relatively better positioned compared to other emerging markets amidst the ongoing global uncertainty. Conceptually, foreign investors want to buy Indian stocks, but they do not want to overpay. Also read | Textiles to tech: Seven stocks that stand to gain from the India-UK FTA Even after a broader market correction, valuations are not anywhere close to being reasonable. Only financial stocks are available at pre-covid multiples, hence they are the favourite by default. Plus, there is scope for growth there as well. Even if banks' net interest margins come under pressure as the RBI cuts rates, over a two-three-year view, they will have decent compounding of value as loan volumes will receive a boost after rate cuts. Domestic institutional focus is on sectors with the least exposure to exports. Hence, themes like domestic consumption have gained traction lately. What is your view on that? I'm wary of feeding the narrative here. Yes, exporters are in trouble, but how well are non-exporters expected to do? This strategy may work for a few months, but I'm not entirely convinced that they will surprise on earnings. For example, hotels and airline companies are growing well. Their capacity utilizations are high. But are they going to surprise us anymore? This may be difficult given already elevated expectations. Do you expect a rebound in Indian consumption after the tax break in the Union budget, and hence a rebound in broader earnings in 2025-26? The quantum of the tax break is just 0.3% of India's GDP. So, I would be sceptical about whether it leads to any material change in consumption. Moreover, young consumers are increasingly chasing experiences, so it remains to be seen how the extra cash will be used beyond smaller ticket discretionary items. But what really perplexes me is whether Indian consumers are really in trouble, or are they just more value-conscious? We have observed that wherever companies have reduced the prices of products, they have been able to gain volumes and market share quite rapidly. The recent disruption in the beverage space is a prime example. Do you see the rural segment leading India's consumption story as urban consumption continues to languish following a post-covid normalisation? India's consumption story is more of an income distribution issue than a rural-urban divide. According to the RBI's latest consumer confidence survey, mostly the low-middle-income households have expressed a drop in confidence levels after an initial recovery post-covid. This is a bit of a mystery because on one hand, you have large, listed companies struggling to grow volumes of basic staples, but on the other hand, service sector sales remain robust, flight ticket sales are rising, and jewellery consumption is doing extremely well despite the ₹1 lakh sticker shock on gold. Also read | These five stocks are proof that value investing is far from dead We are seeing smaller unlisted consumer companies from the private equity world, like consumer startups growing very rapidly, while big names are reporting meagre top line or volume growth. Our sense is that such listed companies are probably over-earning. They are defending their margins too aggressively. Previously, you had commodity price inflation, so companies raised prices to pass it to the consumer, but commodity prices have not been a problem for quite a while. Moreover, the staples companies will themselves tell you that their demand is very price-elastic. But prices have not been cut. Hence, they are seeing lacklustre volume growths. What are the positive levers for the Indian economy? I believe urbanization is a slightly underappreciated and unexplored driver of the Indian economy. There is a significant degree of migration happening right now in all state capitals, and not just in top-tier metros like Delhi or Mumbai. This will likely boost and sustain consumption. Second, there is a lot of focus on manufacturing right now. Even though India's manufacturing-to-GDP ratio has not actually improved for all the effort that has been exerted. I think this is more a theme that needs to be seen from the bottom up. With the trade war, more manufacturing will come to India. It has started with iPhones and electronics, opening up opportunities in specific sectors. Now it is up to those who are able to best capitalize on them. Given the market's latest reaction, following the ceasefire agreed between India and Pakistan over the last weekend, do you expect more volatility ahead from this front, or has the market priced in relative stability for now? Yes, markets are likely to remain volatile in response to changes in US trade policy, potential new trade deals signed between countries, and ultimately driven by actions major central banks take in response to any weakness in economic data.
