RIL Post AGM: Top brokerages upbeat; here's what they say

At the 45th AGM on August 29, Reliance Industries chairman Mukesh Ambani revealed the company's ambitious plans in the field of energy, telecom and entry into the FMCG space.

Reliance Jio plans to invest ₹2 lakh crore to roll out 5G services pan India by December 2023. It plans to launch 5G services over the next two months across major cities.

In the energy segment, it has bigger plans. As brokerage firm Motilal Oswal Financial Services pointed out, the company recently acquired a 100% stake in REC Solar, which specializes in solar panels. In addition to the earlier announcements, the company highlighted: a) an upcoming 10GW solar PV cell and module production capacity by CY24, and b) targeted 20GW capacity by CY26 as part of the five GIGA factories under process.

For the retail segment, the company said it will continue to expand in all categories (grocery, electronics, fashion, and pharma) through physical as well as digital platforms. It also plans to foray into the FMCG space.

Brokerage upbeat

Most brokerage firms cheered the AGM announcements, reiterating their positive views on the stock of the oil-to-telecom behemoth.

Among the global brokerage firms, JPMorgan maintained an 'overweight' call on the stock with a target price of ₹3,065. As reported by CNBC-TV18, JPMorgan said the company's AGM laid out the next phase of the company's growth with a focus on new energy, and investments in petrochemical and 5G.

"With AGM behind us, the focus should shift back to earnings. Surging diesel cracks should translate into strong refining earnings through FY23," CNBC-TV18 reported JPMorgan saying so.

Citi, CLSA and Jefferies maintained a 'buy' call on the stock with a target price of ₹2,810, ₹3,180, and ₹2,980, respectively, as per CNBC-TV18.

UBS also maintained a buy call on the stock with a target price of ₹3,150. As reported by CNBC-TV18, UBS said the near-term net debt of the company will rise as the capex stated in AGM is higher. However, definite timelines and details on potential opportunities will keep concerns off the table.

Among the domestic brokerage firms, Motilal Oswal has maintained a buy call on the stock with a target price of ₹2,880.

The brokerage firm expects RIL's consolidated revenue/EBITDA to clock 13%/15% CAGR over FY22-24, which does not factor in any incremental growth from 5G capex, new energy, and other segments.

Motilal believes retail, telecom, and new energy can be the next growth engines over the next two-to-three years, given the large technological advancements and ambitious growth targets. However, the same can dent its existing single-digit return ratios in the near term.

"We value the refining and petrochemical segment at an FY24 EV/EBITDA ratio of 7.5 times, arriving at a SoTP valuation of ₹721 per share for the standalone business. We ascribe an equity valuation of ₹1,027 per share to RJio and ₹1,202 per share to Reliance Retail, factoring in the recent stake sale," Motilal Oswal said.

"Our higher EV/EBITDA multiple of 41 times for retail and 19 times for digital services, underscore new growth opportunities in the digital space and steady market share gains," the brokerage firm added.

Kotak Securities has also maintained a buy call on the stock with a target price of ₹2,980, citing RIL as its preferred pick in the large-cap Indian oil & gas space.

"In O2C business, while continuance of export tax on diesel and ATF is disappointing, the overall impact is low after the exemption to SEZ refinery. With regional refining margins elevated, we see upside risks to our O2C earnings. In our view, while large capex plans in Jio, O2C and New Energy will impact near-term free cash-flows, overall these should be value accretive, as new capacities come online," said Kotak Securities.

According to a MintGenie poll, an average of 33 analysts have a ‘buy’ call on the stock.

Shares of Reliance Industries closed 1.63% higher at ₹2,639.10 on BSE on August 30.

Disclaimer: The views and recommendations are those of individual analysts or broking firms, not MintGenie.