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Brokerage house JPMorgan on Monday explained its bullish stance on Reliance Industries (RIL) after an investor ‘pushback’, <a target="_blank" href="https://www.business-standard.com/article/markets/investor-pushback-sees-jp-morgan-defend-reliance-industries-upgrade-122062001196_1.html">Business Standard said</a> in a recent report.&nbsp;

In a rare note, the brokerage house listed the concerns of investors and offered detailed reasons for its decision to upgrade the RIL stock from ‘neutral’ to ‘overweight’, the BS report stated.

The report mentioned that on June 16, JPMorgan had set a target price of ₹3,170 per share, saying <a target="_blank" href="https://mintgenie.livemint.com/stocks/reliance-industries-S0003018">RIL</a> was amongst the few large companies in India with a positive earnings revision cycle, given the strong refining and gas environment that prevailed globally.

“RIL remains among the best-positioned refiners globally, given its ability to buy and process arbitrage barrels, a diesel-heavy slate, and an export focus,” JP Morgan said in its report.

However, on Monday, the brokerage house released another note saying that while most investors saw RIL as a relative outperformer, given the strong near-term earnings outlook, some struggled to justify valuations for its non-energy businesses, including retail and telecommunications (telecom), BS noted.

“We continue to see RIL’s consumer business valuations hold up, given the company’s ability to invest and grow businesses even in a potential economic downturn. And RIL’s consumer businesses continue to expand into multiple categories,” JPMorgan said in the latest note.

Most analysts told BS that they expect RIL to spell out its future plans for the retail and telecom businesses, including whether it will list the two companies and by when it would do so.

However, JP Morgan noted that while any concrete announcement on potential initial public offers of the consumer businesses (retail and telecom) would be positive, it was not its base case. “We see eventual monetisation of the non-energy businesses, but we do not see them in the near term,” it said.

RIL’s oil-to-chemicals (O2C) business remains amongst its key segments, contributing close to 60 percent of its revenue and nearly 50 percent of its earnings before interest, tax, depreciation, and amortisation (Ebitda). O2C includes refining, petrochemicals, and fuel retail, noted the BS report.

It added that retail and telecom, on the other hand, account for 34 percent of revenue and nearly 45 percent of Ebitda, according to its financial results for the financial year ended March 31, 2022 (2021-22, or FY22).

FY22 also saw RIL surpass gross revenue of $100 billion ( ₹7.9 trillion) on the back of its performance in the O2C, telecom, and retail segments. New energy presents a further upside for growth, sector analysts told BS.

"While RIL’s renewables business is still very nascent, we believe the company remains well-positioned to grow the renewables business,” JP Morgan said on Monday.

JPMorgan defends Reliance Industries upgrade post investor pushback: Report

In a rare note, the brokerage house listed the concerns of investors and offered detailed reasons for its decision to upgrade the RIL stock from ‘neutral’ to ‘overweight’, the BS report stated.

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