Reliance Industries (RIL) share price jumped over 2 per cent on Monday to touch intraday high of Rs 2,386.95 after CLSA upgraded the rating and target price. The international research firm has upgraded Reliance Industries’ rating to ‘buy’ and has raised the target price to Rs 2,955 from Rs 2,850 earlier. “After a sharp fall, the company is now within 15 per cent of our conservative value. It’s at a good entry point to play its long-term promise across multiple big India themes,” the rating agency said in its note. RIL stock has risen over half a per cent in the last one month, and rallied over 25.73 per cent in the past year. Going forward, the stock may rally around 27%. Reliance Industries was quoting at Rs 2,378, up Rs 49.80, or 2.13 per cent, on the Bombay Stock Exchange.
RIL at a good entry point to play long-term promise across multiple big India themes
“Clear progress in Jio and retail as well as a doubling of the valuation of listed & unlisted comps of these business over the past 18 months and some value for new energy should easily justify the gap in its current price and our conservative value. We believe Reliance is at a good entry point to play its long-term promise across multiple big India themes as well as top-quintile near-term earnings growth among Nifty names”, CLSA said in its note. It further stated that over the past 18 months, there has been a big tariff hike in Reliance Jio, more evidence of industry consolidation, progress in broadband, and positive movement in the company’s technology endeavours.
“Since its mid-2020 stake sale, Retail has seen further improvement as a dominant O2O player. These include a 35% rise in selling area to 40m sq feet, a 20x expansion in merchant partnerships under Jio Mart Grocery, doubling in number and frequency of ordering for Jio Mart, a 3x rise in online product assortments and the start of merchant partnerships in Jio Mart Digital. Driven by a huge rerating in multiples, the EV of listed retail players has nearly doubled in the past 18 months”, the foreign firm said. CLSA highlighted that definitive business progress in Reliance Retail and Jio, as well as, a spike in the valuation of comps along with some value for the recently launched new energy business should easily justify the USD 27 billion difference in current market cap and their conservative valuation.
Jio and Retail could be big triggers to play out within 24 months
With 27% upside, CLSA sees now as a good entry point, and has upgraded RIL stock from O-PF to BUY. “Positive momentum across businesses viz. tariff hike in Jio, strong expansion in Retail, a higher O2C margin and rising gas prices in E&P drives 29%/34% YoY growth in our FY23 Ebitda/PBT and puts RIL into the top quintile on near-term profit growth on the Nifty” it said. RIL remains a great way to play the long-term themes of rising share of organised retail and ecommerce, digital and technology penetration through Jio and its focus on new energy. Going forward, the IPO of Jio and Retail could be big triggers to play out within the next two years, according to CLSA.
The Mukesh Ambani-led conglomerate had on January 21 reported a strong quarterly report card, where net profit shot up 41.5% on-year basis to clock in Rs 18,549 crore (including an exceptional gain). RIL’s total income rose 52% from the previous year to reach Rs 1.95 lakh crore. The Q3 strong growth was driven by robust performance across businesses especially from refining, telecom, retail and E&P (exploration and production) businesses, said the company.