The shares of one of the largest conglomerates in India were trading at ₹ 2431.65 apiece on Friday after multiple brokerages upped the scrip’s target price.
Reliance Industries is a Fortune 500 company and has evolved from being a textiles and polyester company to an integrated player across energy, materials, retail, entertainment and digital services. Reliance’s products and services portfolio touches almost all Indians on a daily basis, across economic and social spectrums. Recently, it demerged its financial services arm Jio Financial Services.
Brokerage firm Jefferies believes that Reliance’s valuation is favourable, even after a 7.5 per cent decline from its record high. However, it cautioned that strong global refining margins may not last. It has maintained a buy rating on the stock with a target price of ₹ 2,950 per share, indicating an upside of 21.32 per cent from its current share price.
In its report, it said that the robust refining margins help protect against potential downside risks to the Street estimate for Reliance’s oil-to-chemical business EBITDA. Moreover, it pointed out that the reintroduction of export duty on refined products will cap the margin growth at roughly 25 per cent of Reliance’s refining output.
The brokerage expects reduced capital intensity in Reliance Jio and Reliance Retail by FY25, leading to robust free cash flow. On the upside scenario, it has assigned a target price of ₹ 3,300 per share, marking a 35.71 per cent upside from its current valuation.
Meanwhile, CLSA had maintained a target price of ₹ 3060 per share on Reliance Industries, translating to an upside of 25.84 per cent as compared to its current share price. It highlighted the company’s commitment to scale up goals and the potential for investment to double, contingent on feasibility.
Reliance made three acquisitions last year totalling $50 million to enhance its new energy capabilities, bringing cumulative investments in this area to $800 million. Its report confirms goals of 10 GW/20 GW solar capacity by 2024/2026, and 5GWh/50GWh battery capacity by 2024/2027.
Investments could double from Rs 75,000 crore planned if viability is proven, details expected at the AGM on August 28, according to CLSA’s report.
With a market capitalization of ₹ 16,45,058 crores, Reliance Industries is a large-cap company. It has a low return on equity of 8.92 per cent and an ideal debt-to-equity ratio of 0.41. Its shares were trading at a price-to-earnings ratio (P/E) of 25.40, which is higher than the industry P/E of 15.83, indicating that the stock might be overvalued as compared to its peers.
The company’s promoters hold a 50.39 per cent stake in it, followed by foreign institutional investors with 22.48 per cent, retail investors with 11.90 per cent, domestic institutions with 8.78 per cent and mutual funds with 6.45 per cent.
Written by Simran Bafna
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