India’s largest petrochemical producer gained around 0.7 percent after UBS recommended a buy call on the stock with an upside of 17 percent.
Reliance Industries is in the business of energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles. The company is on a mission to make India a place with the most affordable green energy by 2030.
On Friday, Reliance Industries Ltd. shares were trading at ₹2,912, up 0.35 percent from the previous close on the National Stock Exchange. The company has a market capitalization of ₹ 19,70,338 crore.
Reliance Industries Ltd. revenues increased by 4 percent year on year from ₹2,16,737 crore in Q3FY23 to ₹2,25,086 crore in Q3FY24, while net profit has increased by 10 percent from ₹17,806 crore to ₹19,641 crore.
Reliance Industries Ltd. shares have gained 23 percent in the last six months and 27 percent in the last 12 months.
Based on a Strong outlook for Reliance Industries, UBS upgraded its target price from ₹3,000 per share to ₹ 3,400, representing 17 percent from Friday’s early trade price of 2,909 per share.
UBS anticipates that Reliance’s consumer business will account for approximately 85 percent of the company’s increased Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) from financial year 2024 to 2026.
UBS suggests that the downward trend in Reliance Industries’ earnings might be stabilizing, having experienced reductions of 19 percent and 27 percent over the past two years, mainly due to the consumer businesses’ performance not meeting market expectations.
The brokerage mentioned that while there may be an increased possibility of tariff hikes for Jio, the consumer business’s earnings visibility seems to be improving. Additionally, they noted strong subscriber additions, sustained momentum in retail
revenue, and potential margin expansion, all of which could lead to a reversal in the trajectory of the company’s earnings revisions.
The brokerage has revised its revenue and EBITDA estimates for the core retail business by 1 percent and 4 percent respectively, for the years 2024 to 2026. Due to a gradual improvement in discretionary spending, favorable raw material prices, and a concerted effort to promote premium products in grocery stores.
“UBS stated in its note that Reliance Retail is strategically positioned to leverage India’s enduring retail potential through its expansive retail footprint, distinctive product range, and introduction of consumer-focused formats. Additionally, UBS anticipates that Reliance Industries will significantly decrease its debt by approximately $10 billion within the next two years, as improved earnings are poised to generate sufficient cash flow to support capital expenditures.”
Written by Omkar Chitnis
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