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Monday, June 13, 2016
Reliance Infrastructure Ltd: Buy
The Stock of Reliance Infrastructure Ltd (Rs.532) is trading above its 21D, 100D, 150D, 200D SMA. Recently, a brokerage house and a Bombay based business publication has given a buy on the scrip with the targets of Rs.580-582.
Meanwhile, Reliance Infrastructure Ltd reported a 43.7% rise in fourth quarter consolidated net profit helped by lower expenses and a one time gain in its EPC (engineering, procurement and construction) business.
The company has shortlisted two international bidders for monetization of its 11 operational roads assets, said Lalit Jalan, who took over Reliance Infrastructure from 1 January as acting chief executive after heading the company in prior stints for over seven years.
The Anil Ambani Group-led company’s consolidated net profit rose to Rs.659.85 crore for the three months ended March from Rs.459.11 crore in the year-ago period.
Total income from operations remained almost flat at Rs.4,469.28 crore from Rs.4,596.09 crore a year earlier; hurt by a decline in its largest power business. Power business net sales fell 11.7% to Rs.2,748.14 crore due to lower pricing while those in the EPC and contracts business rose 8.4% to Rs.907.44 crore.
Net sales in Infrastructure and cement business rose 31.8% and 35%, respectively.
What is interesting is that total expenditure during the quarter fell 14.5% to Rs.3,520.97 crore.
On a standalone basis, Reliance Infrastructure’s net profit rose 62% to Rs.728.95 crore during the quarter while total income from operations fell by 0.7% to Rs.2,781.47 crore.
The company is in negotiations with global pension funds and investment companies, including the Canada-based Brookfield Asset Management Inc. and CPP Investment Board (formerly the Canada Pension Plan Investment Board) to sell its portfolio of 11 toll-based road assets, the online financial portal Mint reported on 15 February.
In February, the company said agreed to sell its cement assets to Birla Corp. Ltd for Rs.4,800 crore as part of the its efforts to pare debt and expand its new defence manufacturing business.
As on 31 March, Reliance Infrastructure’s consolidated debt stood at Rs.25,000 crore.
Therefore, Buy the share at the CMP of Rs.532, for short term targets of Rs.580-592. Keep a SL of Rs.497, for any short term trade; though the chance of breaking this level, is very very less.