Reliance Industries share price fell over 2% on Monday after the company reported a 22.5% on-year growth in consolidated net profit at Rs 16,203 crore for the quarter ended March, on the back of bumper oil refining margins, steady growth in telecom, digital services and retail business. RIL shares plunged 2.6% to hit an intraday low of Rs 2,542 apiece on the BSE in opening deals, dragging Sensex by 800 points. The stock has rallied 6% so far this year and brokerages see up to 22% potential rally going forward, given that earnings growth prospects for RIL remain strong, and the company’s new-energy business is expected to provide the next leg of growth opportunities, besides aiding its conventional oil-to-telecom business.
Stock Talk: Should you buy, hold or sell Reliance Industries (RIL) shares?
Motilal Oswal: Buy
Target price : Rs 2,800; Upside: 18%
Reliance Industries’ earnings trajectory is expected to improve further over the next 12 months driven by strength in refining, further hike in telecom tariffs, and trong growth in retail business. Analysts at Motilal Oswal value RIL’s standalone segment at 7.5x, telecom at 17x FY24E, and retail at 31x FY24E EV/EBITDA. “With a target price of Rs 2,800, we reiterate our BUY rating on the stock. While it is difficult to value the recent foray into renewables as well as the future foray into chemicals, the current valuation multiple of the standalone business may see an upward revision going forward,” the brokerage said. Key risks to Motilal Oswal’s rating could be technology risks associated with the new age renewables, high capex as well as similar large-scale announcements by other global players.
ICICI Securities: Add
Target price: Rs 2,865; Upside: 9%
Analysts at ICICI Securities said that while EBITDA/EPS CAGR of 25%/29% over FY22-FY24 remains peer-leading, but they continue to believe there is limited upside from here due to: stronger capex momentum to further push back FCF generation and dampen return ratios; already strong multiples are factored in CMP; 23% outperformance to Sensex seen in past 12 months; and limited signs of return of capital to shareholders. “Earnings growth prospects for RIL remain strong, but we remain skeptical of meaningful expansion in return ratios and/or any major moves to return cash to shareholders in view of the ‘New Energy’ investment plans,” it said. The brokerage reiterated ‘Add’ rating on the stock with a revised target price of Rs 2,865 per share, implying 9% upside.
Edelweiss Securities: Buy
Target price: Rs 3,205; Upside: 22%
According to Edelweiss Securities’ analysts, RIL’s strength lies in its ability to build businesses of global scale and execute complex, time-critical, and capital-intensive projects which will prove advantageous as it embarks on large investments in all segments. The brokerage expects RIL’s consumer business (Digital and Retail) to contribute around 50% of EBITDA from FY25 given its strong expansion and customer base. “We believe refining margins in Asia will rise due to a “paradigm shift in regional refining dynamics” from West to East, which will favour a complex refiner like Reliance,” they said. It retained the ‘buy’ call on the stock with a target price of Rs 3,205.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)