Brokerage UBS has downgraded Reliance Industries to neutral from buy as it believes that the company’s key segments — oil-to-chemicals, retail and digital — could face macro headwinds. However, it has raised the target price to Rs 2,300 from Rs 1,700 after rolling over valuations to FY22.
This is the fourth downgrade by a large brokerage in recent weeks after CLSA, HSBC, and Edelweiss.
UBS said Reliance has deleveraged ahead of investor expectations and the discount to fair value has turned into a premium. The stock has surged nearly 150 per cent from March low. The brokerage said this premium would be justifiable given its leading presence in India’s digital and e-commerce ecosystem but the pandemic-driven macro slowdown brings significant challenges.
“Although Covid-19 spurred adoption of digital and e-commerce, it also brings near-term execution challenges given RIL is still in the maiden execution of its new commerce and fibre-to-the-home (FTTH) businesses,” said UBS.