Reliance Industries shares at Rs 2,920? Here's what domestic brokerages said after RIL's AGM

Shares of Reliance Industries have been at the focus of investors amid the buzz surrounding its annual general meeting (AGM). Absence of any major announcement for the near-term is weighing on the markets, but analysts at Dalal Street believe that the company is headed for value creation over the next decade, thanks to transition-led strategy.

Majority of brokerages are positive on shares of Reliance Industries, the energy-to-retail-to-telecom conglomerate, led by billionaire businessman Mukesh Ambani. Reliance Industries is the largest company listed at the Indian stock markets in terms of market capitalisation.

Shares of Reliance Industries dropped more than one per cent on Tuesday to Rs 2408.45, before settling at Rs 2422, commanding a total market capitalization of more than Rs 16.38 lakh crore. The scrip had settled at Rs 2,442.55 on Monday.

Shares of Reliance Industries have dropped about 7 per cent in the year 2023 so far, while the stock fell 5 per cent in the last one month. However, the stock has delivered a return of more than 150 per cent from its covid-19 lows.

We expect the company to clock a consolidated revenue and EBITDA CAGR of 12 per cent over FY23-25. Retail, Telecom, and new energy are poised to become the upcoming growth drivers over the next two-to-three years, given the large technological advancements and ambitious growth targets, said Motilal Oswal Financial Services with a buy and a target price of Rs 2,920.

"We value the refining and petrochemical segments at 7.5 times EV/EBITDA, arriving at a standalone business valuation of Rs 904 per share. We ascribe an equity valuation of Rs 750 per cent share to Jio and Rs 1,485 per share to Reliance Retail, factoring in the recent stake sale and an equity valuation of Rs 16 per cent share pertaining to new energy on book value," it added.

JM Financial reiterated a 'buy' rating with target price of Rs 2,900 per share because we believe concerns on debt are overdone and capex will not only moderate but, importantly, also be fully funded by a gradual increase in internal cash generation. RIL’s guidance on keeping reported net debt to EBITDA below 1x also gives comfort.

"Be that as it may, we believe RIL could still drive a robust 14-15 per cent EPS CAGR over the next 3-5 years with Jio’s ARPU expected to rise at 10 per cent CAGR over FY23-28 with ARPU being on a structural uptrend given the industry structure, future investment needs, and the need to avoid a duopoly market. Strong growth momentum continues in the company’s retail business," it said.

The AGM of RIL highlighted the company’s ambitious plans across business verticals, particularly the upcoming nationwide rollout of 5G technology in India, a transformative AI revolution, expansion within the FMCG sector, and investments in the field of green energy.

RIL 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, said ICICI Securities.

Additionally, the induction of three members of the next generation into the board with committing to remain chairman for at least the next five years – are aimed to create a stable succession roadmap for RIL Our concern on muted return ratios and limited free-cash flow yield remains, it added while reiterating an 'Add' rating with a target price of Rs 2,444.

The induction of three next-generation members of the founder family on RIL’s board was the key highlight of RIL’s 2023 AGM. The announcement is not surprising as the three were already in leadership roles per board of RJio, retail and new energy. Retail will be the fastest-growing business, said Kotak Institutional Equities.

In Jio, post 5G roll-out capex will slow down. RIL reiterated that capex will be funded by cash flows, and net-debt/EBITDA will remain below 1 time. We finetune RRVL valuation after stake-sale, it said with a revised fair value of Rs 2,600 and an 'add' rating.

ŠSharesKhan has maintained its 'buy' rating on RIL with an unchanged target price of Rs 2,880, while Prabhudas Lilladher also has the same rating on the counter with a target price of Rs 2,898.

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