The shares of India’s largest conglomerate gained traction this week after Jefferies raised its ‘buy’ recommendation to an upside of 25 percent based on Wednesday’s close price of Rs 2,371.
Reliance Jio Infocomm Ltd (RJIO), a subsidiary of Reliance Industries Limited, is a telecommunications service provider and mobile network operator. The firm sells SIM cards, mobile devices, and internet dongles. It also offers services such as Business Applications, Connectivity, Internet of Things, JioBusiness Solutions, and JioCloud.
On Friday’s early trade, Reliance Industries Ltd shares were trading at Rs 2,346.15, up Rs 12.45 or 0.52 percent from the previous close.
The company’s revenue declined by 5 percent year on year, rising from Rs 219,304 crore in Q1FY23 to Rs 207,559 crore in Q1FY24. During the same time period, net profit decreased by 7 percent, from Rs 19,508 crore to Rs 18,182 crore.
Based on a Strong outlook for Reliance Industries, Jefferies upgraded its consolidated EBITDA forecasts by 1-2 percent and recommended a target price of Rs 2,975, representing a 25% increase from Wednesday’s closing price of Rs 2,371.
The rationale behind providing such a recommendation is
● According to the brokerage, Jio’s access to 30 million affluent households places it as a key player in India’s $4 billion TV ad industry by analysing content-watching trends. There is also the possibility of extra revenue to firms from cloud PC and gaming, home networking, and security products.
● Jefferies forecasts a 12-22% increase in home users for Jio by March 26, as well as a 4x increase in home broadband revenues to $2.3 billion in FY26. As a result, the company may increase revenue/EBITDA forecasts for Jio by 1-4 percent and anticipate Jio to deliver a 17/20 percent CAGR in rev/EBITDA during FY23-26E.and expects capital intensity would decrease in Jio and Retail from FY25E onwards.
● Brokerage expects JioAirFiber can service 400 million 5G mobile customers and 20 million FWA homes. The acquisition of Mimosa Networks will help the company to expand in Fixed Wireless Access capacity using unlicensed frequency radio.
● Brokerage anticipates that JioAirFiber would generate $7-10 billion in revenue for the firm. This estimate is based on the potential of promoting broadband adoption, particularly among the 85 million Pay-TV homes.
Written by Omkar Chitnis
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