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Morgan Stanley adds Reliance Ind, Coal India to focus list

Brokerage Morgan Stanley has added petrochemical major Reliance Industries and state-run coal mining company Coal India to its focus list at the expense of Bank of India and ITC . The brokerage expects Reliance Industries's profits to grow 50 percent over F2015-18 with downstream investments of USD 15.5 billion on four projects adding to earnings potential. According to the report, the key is the telecom business. "The launch is nearing, the regulatory environment has improved, spectrum auction bidding was rational, and the 4G ecosystem is improving. All these factors indicate a better business case, whereas the market appears to be assigning no value to this business," it explained. In case of Coal India, Morgan Stanley sees improving realisations and policy reforms driving earnings over the coming couple of years. It forecasts average realisation increases of 6.5 percent per annum in F2015-17. "Recent government steps like removal of e-auction cap and the proposed coal linkages auction suggest clear progress in this direction. Volumes growth is perking up as a consequence of several steps by the government and the company," it reasoned. The brokerage expects Coal India's production to grow by 8.7 percent in F2016 and 9.1 percent in F20F17 against a CAGR of 2.8 percent during F2010-15. According to its note, with a dividend yield of circa 6 percent, strong cash flows and large cash balances, the value aspect of the stock should not be lost. Coal India's May production rose by about 13 percent year-on-year. Production in April had increased by 10.7 percent.

source: http://www.moneycontrol.com