Reliance Industries Ltd share price jumped 2 per cent from day’s low to Rs 2,555 apiece on BSE on Wednesday. Bernstein Research sees 33 per cent upside potential in RIL stock price going forward owing to its strength across segments. The research firm also expects higher earnings growth potential than what the consensus estimates suggest, and has given ‘outperform’ rating to it. The brokerage firm has also raised RIL’s price target to Rs 3,360 from Rs 2,830 earlier, implying a 33 per cent rally from previous close.
Reliance Industries stock price has added nearly 3 per cent in the last five days, while it has fallen 4 per cent in the last month. RIL stock has gained over 6.5 per cent so far in the year 2022, and rallied 23 per cent in the last one year.
Key risk: Recession, leading to sharp decline in margins
Bernstein Research has valued the company on the basis of FY23 expected earnings per share of Rs 154 which is 29 per cent above consensus estimates. It said that Reliance has taken advantage of Russian crude, but this may not be sustainable given increased scrutiny. “We estimate O2C can achieve record EBITDA of INR845bn (+60% y-o-y) which is 25% higher than consensus estimates of INR676bn. Key risk ahead is a recession that leads to a sharp decline in margins next year,” it said.
Jio to deliver strong results driven by tariff hikes
The research firm believes that Reliance Jio is set to deliver strong results driven by tariff hikes. ARPU expanded by 11% sequentially, and 21% on-year to Rs 167.6 led by tariff hike and improved subscriber mix. EBITDA margins increased to 50.4% as operating leverage offset subscriber churn. “We believe the stage is set for more tariff hikes driven by stable industry structure and government reforms,” it noted.
Retail revenues to grow at 30%+ CAGR driven by strong store additions
Bernstein also noted that ecommerce accelerated across categories with Digital and New commerce accounting for 19 per cent of core retail sales. Reliance retail growth outlook has improved as the economy opened up (footfalls at 104 per cent of pre-covid levels). Store additions remained strong (overall 15,200 stores). “We expect retail revenues to grow at 30%+ CAGR driven by strong store additions. Core retail EBITDA to be steady at 10.5%,” it said.
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