What is your outlook on . The stock is up by about 5.5% a month. In the last six months, it was higher by nearly 30%. The market has been waiting for the Saudi Aramco deal to close. Your views?
There are three points on which Reliance stock prices should be looked at from now and thereafter. During this festive season, they are expected to launch the new phone which is going to cost around Rs 4,000 per piece and they are expected to target about 10 crore customers. They are talking about creating a book size of around Rs 40,000 crore.
From Rs 40,000-crore book, they are expected to earn about Rs 18,000 crore worth of revenue through the ARPUs, taking ARPU at Rs 150. I think the company is talking about adding an EBITDA of close to Rs 10,000-14,000 crore in the books in a full year basis. So this is where one trigger point is.
The second trigger point would come once they start implementing their giga factory projects. We would be seeing a larger amount of visibility of earnings coming out from there. A Rs 60,000 crore worth of investment across four giga factories could result in Rs 2,25,000-2,50,000 crore top line growth eventually and from that, Rs 80,000-100,000 crore of EBITDA is possible. That visibility would emerge in 2023-24 period.
Last but not the least, the Aramco deal is probably getting more traction now with them putting across the new subsidiary in Saudi Arabia as well. We are likely to see the Aramco deal happening sooner than later. So these three points should be trigger points for the Reliance stock price eventually.
Going into the earnings season with TCS kicking it off on Friday, how would you view the IT sector?
I think FY23 is fairly discounted currently. As far as IT earnings outlook is concerned, many of these companies could continue with 15-17% growth rate on an average. That will continue.
Some of the mid-tier companies could be possibly accelerating and their growth could be on a higher side, but by and large, 15-17% kind of earnings growth is being expected out of IT companies. More importantly, they are continuously building the pipeline of new orders which are the large $1 billion dollar kind of orders with visibility of five to seven years. That means the 15-17% growth rate that we are experiencing is likely to gain momentum with the new order book pipeline getting added and in FY22-23 period, there could be 17-20% growth rate.
For IT companies, it is a case of buy on dips. If the market does correct after results or for whatever reason, one should allocate more funds to IT companies. I remain positive on the prospects of Indian IT companies in general.
