Reliance Industries share price joined the rally in broader indices today after Japanese brokerage firm Nomura raised its target price on the stock to Rs 2,200. The revised target price is a 19% upside from the stock's previous day's closing of Rs 1,843.
The stock has gained after 3 days of consecutive fall. The large cap stock gained up to 4.17% to Rs 1,919. RIL share closed 3.70% higher at Rs 1911. Reliance Industries share stands higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. In an year, the share has gained 49.14% on BSE. The share has gained 26.24% since the beginning of this year.
Total 9.89 lakh shares changed hands amounting to turnover of Rs 185.75 crore.
"RIL is our preferred pick in India oil & gas. RIL is now outperforming the benchmark Nifty for the sixth year. From the lows in March, RIL is up 110 percent against Nifty's 41 percent rise. From end-2014, when this cycle began, RIL is up 4.1 times against the Nifty's rise of 30 percent," Nomura said.
"While the run has been very strong, and valuations are getting rich, we believe the outperformance may sustain. Despite a subdued FY21F (weak energy business, COVID-19 impact), we expect a 29 percent CAGR in consolidated earnings over FY20-23F. Also, investor appetite is strong for consumer business. While institutional holding in RIL has been rising, we believe there is under-ownership, given the sharp rise in RIL's weight in Nifty," Nomura said.
"The outlook for Jio has improved significantly with a large stake sale and strategic tie-ups with Facebook and Google. Accordingly, we raise our EV/EBITDA multiple for Jio to 11 times (9 times earlier). We also rolled forward our SOTP valuation to Sep-22F (from Mar-22F earlier). The stock currently trades at 14.9 times FY23F P/E," said Nomura.
Apart from Nomura, other brokerages have given their views on the outlook of the stock.
Religare Broking said, "With so many developments on the Jio Platforms mainly on the digital side as well as well-known strategic partners as investors, it has the potential to become a truly global company, offering solutions to clients worldwide. Going forward, RIL plans to strengthen and grow retail and O2C business are also an encouraging sign.
On the financial side, it has a healthy balance sheet, net debt-free status, strong management and promising growth prospects across businesses. We remain positive on the company's long-term growth plans and would advise investors to hold the stock for healthy returns. Fresh investment in RIL to be made only on dips."
Credit Suisse in its Equity Research report said it has NEUTRAL stance on the RIL stock, with triggers on more clarity on new commerce initiative, and Aramco O2C deal. It added, "We value Jio's wireless business at 8.5 times EV/EBITDA and non-wireless at 12.5 times EV/EBITDA (10x for home broadband/enterprise and 15x for others)."
CS also lined key risks such as slow traction in Jio's non-wireless verticals, energy cycle stays weak, and positive surprise in new commerce retail with significant onboarding of kirana stores.
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