Shares of Reliance Industries (RIL) extended losing streak for the fourth straight session on Tuesday, a day after Mukesh Ambani-led oil-to-telecom conglomerate presented the blueprint for value creation over the next decade in its 46th Annual General Meeting (AGM). The stock witnessed selling pressure as disappointment due to the absence of a specific timeline for listing of telecom and retail businesses and limited disclosure regarding future course of action for newly listed entity, Jio Financial Services, dented sentiment. However, several brokerages have maintained their rating and target price on India's most valuable company after the AGM, expecting an upside potential of up to 23% from the current market price.
Continuing its downward trend, RIL shares declined as much as 0.7% to ₹2,424 on the BSE, while the market capitalisation slipped to ₹16.4 lakh crore. Early today, the bluechip stock opened marginally higher at ₹2,447 against the previous closing price of ₹2,442.55 and touched a high of ₹2,452.15 in opening trade. However, the counter soon lost momentum with 0.8 lakh shares changing hands over the counter in the first two hours of trade so far.
The country’s most valued stock has fallen nearly 4% in the last four sessions as investors booked profit at higher levels. RIL shares touched a new 52-week high of ₹2,635.17 on July 19, 2023, amid sustained buying by investors on hope it would unlock value for shareholders post demerger of Jio Financial Services.
On the other hand, JFSL shares gained as much as 3.2% to ₹218.5, snapping its five sessions losing streak. The stock, which debuted on August 21, touched its lower circuit limits in three out of six sessions amid sustained selling by institutional investors. At the current price level, the stock trades 21% lower than its record high level of ₹278.20 touched on its listing day, while it is down 16.5% from its discovered price of ₹261.8.
In his AGM speech on August 28, RIL’s Chairman and Managing Director Mukesh Ambani unveiled the company's plan to expand the telecom, retail, financial, green energy and O2C businesses. Ambani also announced that the board had approved the appointment of his three children into the board of directors, while he will continue as CMD for the next 5 years with the responsibility to groom, empower and mentor the next-generation leaders.
On the digital business, RIL’s chairman reiterated the target for pan-India 5G rollout by Dec’23 and make India 2G-mukt, and said Jio AirFiber will be launched on 19th Sep’23.
For Reliance Retail, he said that the division will outpace other business segments in terms of revenue and EBITDA growth. He also reiterated the company’s plan to transition its O2C business into a sustainable, green, circular and consumer integrated chemicals & materials business. He also restated the new energy business roadmap and its ₹75,000 crore capex commitment, and announced its foray into wind power generation.
Here’s what analysts say on RIL’s 46th AGM
Domestic brokerage JM Financial in its report said that net debt concerns of India’s most valued firm is overdone, and also because RIL has industry leading capabilities across businesses to drive robust 14-15% EPS CAGR over the next 3-5 years. It has maintained ‘BUY’ on RIL with a target price of ₹2,900 per share, an upside potential of around 19% from the current market price.
Prabhudas Lilladher has also retained ‘BUY’ call on RIL shares at SOTP based price target of ₹2,898, saying that Reliance reiterated aggressive growth plans across various business verticals at the AGM. The brokerage in a report said that the company is on-track to complete its 5G rollout by CY23 and launch Jio AirFiber, while the oil and gas segment is on track to produce 30 mmscmd of gas from the KG Basin. On new energy front, RIL plans to setup a battery giga factory by 2026 with its first CBG plant commissioned in Uttar Pradesh. The retail segment will focus on rapid store expansion and brand partnership/acquisitions to accelerate growth.
“We believe RIL provides a good investment opportunity given 1) its transition towards new age technologies and 2) cash flow for growth serviced from traditional refining and petrochemical segment. The company is trading at 12.8x FY24 consolidated EV/EBITDA and 22.7x FY24 consolidated PE. We estimate consolidated EPS CAGR of 10.7% for FY23-FY25E and value Refining and petrochemical segment at 7.5x FY25 EV/EBITDA, Digital services at 15x FY25 EV/EBITDA and Retail at 37x FY25 EV/EBITDA,” it said in a report.
ICICI Securities has reiterated ‘ADD’ on RIL, saying that Reliance in its latest AGM laid out the blueprint for value creation over the next decade, with its emphasis on continuing its transition to a new-age digital conglomerate. “With emphasis on growing its digital footprint by expanding Jio’s product and solutions bouquet, accelerating efforts to transition to new energy and specialty chemicals, and continuing to leverage the world-scale platform established by its retail segment, RIL sees a radically different future for itself over the next decade vs the last 40 years,” it said.
Additionally, the induction of three members of the next generation into the board with Mukesh Ambani committing to remain chairman for at least the next 5 years – are aimed to create a stable succession roadmap for RIL, it added.
Foreign brokerage CLSA has also retained its 'Buy' rating on RIL and upgraded the target price to ₹3,060 a share, up 23% from its current market price, while Jefferies India maintained a ‘Buy’ call with a price target at ₹2,950 a share.
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