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RIL gains as CLSA ups target price on Jio booster

Reliance Jio Infocomm raised its tariffs by nearly 40 per cent, but some of its plans are almost 25 per cent cheaper than those of rivals Bharti Airtel and Vodafone Idea.

ETMarkets.com|
Updated: Dec 06, 2019, 03.45 PM IST
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NEW DELHI: Shares of Reliance Industries gained over 1 per cent in Friday’s trade after foreign brokerage CLSA said hiked its target for the scrip to Rs 2,010 from Rs 1,710 earlier, citing good chances of further upside to Jio’s profit.

The brokerage expects the recently announced tariff hike on JioPhone may result in higher Arpu as customers may prefer 28-day over 84-day plans.

Following the development, the scrip rose 1.07 per cent to hit a low of Rs 1567 on BSE.

Reliance Jio Infocomm raised its tariffs by nearly 40 per cent, but some of its plans are almost 25 per cent cheaper than those of rivals Bharti Airtel and Vodafone Idea, suggesting that the days of price war in the telecom sector may still not be over.

“We see clear drivers for further upgrades to Jio’s forecast. First, we still do not bake-in any near-term hike in JioPhone tariffs, which may be revealed soon. Second, we model a burden of Rs 4,400-Rs 4,800 in the form of interconnect costs. With recent action to charge for off-net calls, there is a chance this impact may be notably reduced. This could raise Jio’s Ebitda by 10-12 per cent,” it said.

“Finally, we build our smartphone tariff forecast using the cheapest 84-day plan. However, we see that our per day premium for the 28-day versus 84-day plan has fallen from 17.5 per cent to 7.5 per cent. This may make customers move to 28-day plans which could potentially raise Jio’s FY21 revenue and Arpu by 6 per cent and Ebitda by 11 per cent,” the brokerage added.

The closure of the fibre and Aramco deal, the start of the petcoke gasification project, launch of its ‘New Commerce’ business in retail and any progress on stake sales in the digital business are other triggers., the brokerage said.

The shares of the company closed 0.30 per cent higher at Rs 1554.95 on BSE.

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