Reliance Industries experiences a surge of over 4%, prompting brokerages to raise their target price.
Shares of Reliance Industries Ltd surged by over 4 percent following positive ratings from various brokerages and increased target prices due to the company’s strong performance across different segments.
The stock rose by 4.4 percent, reaching a high of Rs 1,325 per share. As of 10:19 am, the stock was trading at Rs 1,294 per share on the BSE, showing a 2 percent increase while India’s benchmark Sensex dropped by 0.5 percent to 76,664 points.
Nuvama Research maintained a Buy rating and raised its target price to Rs 1,673 per share. Kotak Institutional Equities retained an ADD rating with a revised target price of Rs 1,435, up from Rs 1,405. HDFC Securities also kept an ADD rating with a target price of Rs 1,670 per share. Motilal Oswal reiterated a buy rating and increased the target price by 26 percent to Rs 1,600 per share.
Analysts attribute the revisions in target prices to the recovery in Oil-to-Chemicals (O2C) margins, EBITDA growth in the digital business driven by improved ARPU, subscriber additions, and new revenue streams, as well as the potential value unlocking in the digital and retail segments.
Kotak maintained a Buy rating on RIL, highlighting various near- to medium-term triggers such as a decrease in capex intensity, ongoing deleveraging, recovery in the O2C and retail segments, the expansion of Homes and Enterprise offerings in R-Jio, and the potential upcoming IPOs of the telecom and retail businesses.
The highlight of RIL’s Q3 performance was the significant improvement in its retail business, with EBITDA increasing by 9.1 percent year-on-year (YoY) and 16.7 percent quarter-on-quarter (QoQ), surpassing estimates by 8 percent. The O2C segment also performed well, with EBITDA up by 2.4 percent YoY and 16 percent QoQ, exceeding expectations by 5-7 percent.
Despite these positive results, the telecom segment’s weak performance partially offset the gains, as the benefits from the July 2024 tariff hike have been slower to materialize. Overall, reported EBITDA increased by 17 percent YoY and 3.1 percent QoQ, falling short of estimates by 4.4 percent. Capital expenditure for Q3 remained high at Rs 323 billion, although it was 5 percent lower QoQ. Net debt remained stable at Rs 1.1 billion.
RIL’s consolidated Q3 EBITDA reached Rs 438 billion, up by 8 percent YoY and 12 percent QoQ, surpassing analyst estimates by 3 percent. The organized retail segment delivered an EBITDA of Rs 68 billion (up 9.1 percent YoY, 16.7 percent QoQ), exceeding expectations by 8 percent. B2C grocery within the retail sector showed particularly strong growth, with revenue increasing by 37 percent YoY. The O2C segment reported an EBITDA of Rs 144 billion (up 2 percent YoY, 16 percent QoQ), surpassing estimates by 7 percent. The E&P segment recorded an EBITDA of Rs 56 billion (down 4.1 percent YoY, up 5.2 percent QoQ), 5 percent ahead of estimates.
Analysts have observed that following a 17 percent correction in the stock price during Q3
One of the key highlights of RIL’s performance in Q3 was the significant improvement in its retail business, with EBITDA increasing by 9.1 percent year-on-year (YoY) and 16.7 percent quarter-on-quarter (QoQ), surpassing estimates by 8 percent. The O2C segment also saw positive growth, with EBITDA up by 2.4 percent YoY and 16 percent QoQ, while the E&P segment performed well, exceeding expectations by 5–7 percent.
Despite these successes, the telecom segment’s weak performance partially offset the gains, as the benefits from the July 2024 tariff hike have been slower to materialize. Overall, reported EBITDA increased by 17 percent YoY and 3.1 percent QoQ, falling short of estimates by 4.4 percent. Capital expenditure for Q3 remained high at Rs 323 billion, although it was 5 percent lower QoQ. Net debt remained stable at Rs 1.1 billion.
RIL’s consolidated Q3 EBITDA reached Rs 438 billion, up by 8 percent YoY and 12 percent QoQ, surpassing analyst estimates by 3 percent. The organized retail segment delivered an EBITDA of Rs 68 billion (up 9.1 percent YoY, 16.7 percent QoQ), exceeding expectations by 8 percent. Within retail, B2C grocery showed particularly strong growth, with revenue increasing by 37 percent YoY. The O2C segment reported an EBITDA of Rs 144 billion (up 2 percent YoY, 16 percent QoQ), surpassing estimates by 7 percent. The E&P segment recorded an EBITDA of Rs 56 billion (down 4.1 percent YoY, up 5.2 percent QoQ), exceeding estimates by 5 percent.
Furthermore, Reliance Industries Limited (RIL) has provided guidance to maintain reported net debt-to-EBITDA below 1x, which was at 0.66x at the end of the third quarter of FY25, offering additional reassurance. Currently, RIL is trading near its bear-case valuation of Rs 1,230.
JM Financial projects a robust 14-15 percent EPS CAGR over the next 3-5 years, primarily due to Jio’s Average Revenue Per User (ARPU) expected to increase at an 11 percent CAGR from FY24-28. This growth is supported by favorable industry dynamics, future investment requirements, and the avoidance of a duopoly market. The clarity on the timeline and valuation for Jio’s listing could serve as a potential catalyst in the near to medium term.
As of now, the stock is trading at a FY27E P/E of 16.3x (3-year average: 24.7x) and a FY27E EV/EBITDA of 8.6x (3-year average: 12.6x).
For more market insights, follow our blog.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.