Reliance Ind shares add Rs 2.35L crore to m-cap in 2024. Should you buy RIL stock?

Reliance Industries Ltd (RIL) is well-positioned to benefit from rising  data demand in India and a likely increase in telecom tariffs, BNP Paribas in its latest note. RIL's retail business, BNP Paribas said, continues to see rapid store-space expansion and that its upstream oil & gas (O&G) business had a significant turnaround, with the start of new production from KG-D6 gas fields and improvements in realisations. 

"We think RIL's new green-energy businesses (solar, batteries, fuel cells  and hydrogen) look promising, though we await more visibility," the broking firm said while suggesting an 'Outperform' rating on the oil-to-telecom major. 

On Monday, RIL shares settled 0.92 per cent lower at Rs 2,932.45. The most valued firm on Dalal Street commanded a maket capitalisation (m-cap) of Rs 19,84,005 crore, up Rs 2.35 lakh crore over Rs 17,48,937 crore m-cap that it commanded at 2023-end.

BNP Paribas values Reliance's telecom business at 11.5 times FY26E EV/Ebitda, which is at a slight  premium to that of Bharti Airtel, due to Jio's larger upfront investments in infrastructure,  including spectrum and network; and potential opportunities from Jio's larger digital  play. 

It values Reliance Retail at 35 times FY26 estimated EV/Ebitda. While Reliance Retail does not have direct comparable peers, this is at a 20 per cent discount to the valuation of leading retail  companies such as Avenue Supermarts and Trent Ltd based on FY25E Bloomberg consensus estimates, due to  lower level of disclosures and differences in the business mix, BNP Paribas said.

"We value the oil-to-chemicals (O2C) division at 7.5 times FY26E EV/Ebitda, which is at a  premium to that of OMCs, which are trading at 5-6 times, due to its higher refining margins  and RIL's private ownership vs the government's majority holding in OMCs. We value the oil and gas (O&G) division at 7 times FY26E EV/Ebitda vs 4 times for ONGC and Oil India, based on Bloomberg consensus estimates. Note that public sector enterprises  in India typically trade at a discount to private peers due to the higher level of government interference," BNP Paribas said. 

Meanwhile, the brokerage sees the new energy business at 2 times invested capital and the media business based on the Reliance-Disney deal valuation. BNP Paribas has a target price of Rs 3,239 on the RIL stock.