RIL Share Price: Reliance Industries (RIL) shares have been under pressure for the last few months. From the level of Rs 1609 on July 8, 2024, this share has weakened by about 19 percent to Rs 1304. Recently, experts and brokerage houses were also not very positive about the stock. But now there is an opportunity to invest in this stock which has come at a significant discount from the peak. Brokerage house Motilal Oswal has given Buy rating to the shares of Reliance Industries and has kept a target price of Rs 1580. This is 20 percent more than the previous closing price of Rs 1312.
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4 key factors
Reliance Jio: Tariff hike, market share gains, and FWA ramp-up to drive growth
Reliance Retail: Growth recovery remains key for re-rating
O2C: Refining margins continue to improve, Petchem remains soft
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risk-reward attractive
Brokerage house Motilal Oswal says Reliance Industries (RIL) has underperformed broader benchmarks, Bharti Airtel and organized retail peers over the past few years, despite similar or better EBITDA growth. The brokerage believes that RIL’s poor performance was due to higher capex in retail and Reliance Jio as well as lack of FCF generation. However, capex is at its peak and RIL is expected to generate Rs 1 trillion cumulative FCF in FY24-27. The brokerage believes the risk-reward is attractive, as RIL is currently trading close to bear-case valuations.
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Expectation of improvement in O2C segment earnings
The brokerage says we see 10 per cent consolidated EBITDA and PAT CAGR build in FY24-27, driven by double that in RJio (tariff hike, market share gains and FWA ramp-up) and Reliance Retail (consistent footprint and category expansion). Single digit EBITDA is possible with CAGR growth. After a sluggish first half of FY2025, O2C segment earnings are expected to improve due to improvement in refining margins. However, the brokerage’s FY27 consolidated EBITDA for O2C and E&P is broadly similar to FY24 levels.
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annual capex
The brokerage says RIL is expected to have annual capex of Rs 1.25-1.3 trillion as the shortfall in RJio capex is likely to be offset by higher capex in new energy initiatives. However, the peak of capex is behind, which should lead to reduction in FCF generation (Rs 1 trillion in FY24-27) and consolidated net debt. For Reliance Retail, the brokerage has set a mixed EV/EBITDA multiple of 32x (35x for core retail and 7x for connectivity) based on the average valuation of retail peers (DMart, Trent, ABFRL, Vedanta Fashion and Metro Brands) .
(Disclaimer: The view or advice on the share is given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert opinion before investing.)
