Shares of Reliance Industries (RIL) experienced a boost, gaining 0.5 percent to Rs 2,406 on November 29, following a favorable evaluation from global brokerage firm JPMorgan. The analysts at JP Morgan assigned an ‘overweight’ rating to the conglomerate, setting a target price of Rs 2,810 per share, implying a promising 17 percent upside from the current levels. The positive sentiment from JP Morgan has ignited optimism about Reliance Industries’ future prospects.
JP Morgan analysts expressed confidence in RIL’s turnaround, asserting that the bulk of earnings cuts for the company were now a thing of the past. “The recent stock correction corresponds to the 21 percent cuts to FY24 earnings per share (EPS) forecasts since June 2022. We believe that the conglomerate is turning free cash flows positive now,” stated the brokerage firm.
The analysts anticipate a revival in investor sentiment, emphasizing the role of RIL’s telecom and retail verticals in driving growth over the next 12 months. Despite a 6 percent decline in RIL’s stock this year, the analysts believe that the correction adequately factors in the challenges faced by the company.
In the September-ended quarter for fiscal year 2023-24 (Q2FY24), RIL reported a consolidated profit surge of 27 percent year-on-year (YoY). The revenue from operations witnessed a modest increase of 1.3 percent, primarily constrained by a fall in the O2C (Oil to Chemicals) business revenue. Notably, the retail segment’s earnings before interest, tax, depreciation, and amortization (Ebitda) grew by 32 percent YoY, while the O2C Ebitda registered an impressive 63 percent YoY climb, propelled by robust margins in petrol and PVC.
Analysts at Prabhudas Lilladher maintained a ‘buy’ rating for RIL, setting a target price of Rs 2,618 per share. Their valuation considered the standalone business at 7.5 times (x) FY26 EV/Ebitda, Jio at 15x FY26 EV/Ebitda, and retail at 37x FY26 EV/Ebitda. Similarly, JM Financial reiterated a ‘buy’ call, dispelling concerns about net debt and highlighting RIL’s industry-leading capabilities across various businesses, projecting a strong 14-15 percent EPS CAGR over the next 3-5 years.
