Shares of a Mukesh Ambani-owned India’s largest private sector company surged nearly 1.6 percent to Rs. 1,243.35 on BSE, during the trading session of Friday.
With a market cap of Rs. 16.7 lakh crores, at 12:55 p.m., the shares of Reliance Industries Limited were trading in the green at Rs. 1,241, up by nearly 1.5 percent, as against its previous closing price of Rs. 1,223.2.
Morgan Stanley Target & Outlook:
Morgan Stanley has maintained an ‘overweight’ rating on Reliance Industries Limited and assigned a target price of Rs. 1,662 per share, representing a potential upside of nearly 34 percent from the current trading price.
The global brokerage firm highlighted that the refining margins of Reliance are showing signs of recovery after two difficult quarters. It also observed an increase in permanent shutdowns of refinery capacity.
Irrespective of a $50 billion reduction in market capitalisation during Q4 FY24, the stock appears to reflect the challenges faced by key business segments but has not yet accounted for potential improvements.
Morgan Stanley anticipates that the company’s free cash flow will gain momentum as around 0.6 million barrels per day of refining capacity is expected to be shut down globally by 2025. Additionally, net capacity additions are projected to be only half of the anticipated demand growth.
The brokerage also noted that the outlook for Reliance’s New Energy segment has become more positive, especially with China imposing limits on the production of new solar panel capacity.
JPMorgan Target & Outlook:
JPMorgan has also maintained an ‘overweight’ rating on the stock and assigned a target price of Rs. 1,468 per share, representing a potential upside of nearly 13 percent from the current trading price.
The foreign brokerage highlighted that one of the primary reasons for the recent underperformance of stock, weak refining margins, has now turned around.
It also pointed out that the slower-than-expected growth in retail revenues has been challenging to predict, leading to a significant reduction in expectations for this segment.
After the correction in the stock, the implied valuation for the retail business is now estimated at 25 times its FY26 EBITDA projections, which is lower than historical averages and below the valuations of peer retailers.
Furthermore, JPMorgan noted that the launch of Reliance’s solar panel manufacturing plants could provide a modest boost to growth in the short term.
Trade Brains’ Target:
Analysts at Trade Brains, have given a ‘buy’ rating on Reliance Industries with a target of Rs. 1,540 per share, representing a potential upside of nearly 26 percent from the current market price.
RIL has laid out a capex of Rs. 1,31,769 crore in FY24 (Rs 1,41,809 crore in FY23). The major investments are to be made in network expansion in the digital services segment, scaling up of the retail business, augmented production capacities in the Oil and Gas segment, and projects in the O2C vertical.
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Financials:
Reliance Industries reported a marginal decline in revenue from operations, experiencing a year-on-year decrease of nearly 0.2 percent, falling from Rs. 2,31,886 crores in Q2 FY24 to Rs. 2,31,535 crores in Q2 FY25.
Similarly, during the same period, the company’s net profit decreased from Rs. 19,878 crores to Rs. 19,323 crores, representing a marginal decline of around 2.8 percent YoY.
Key Financial Ratios:
In terms of key financial metrics, Reliance Industries has a Return on Equity (RoE) of 9.25 percent and a return on capital employed (RoCE) of 9.61 percent. Additionally, the company’s debt-to-equity ratio stands at 0.44.
Stock Performance:
The stock has delivered positive returns of nearly 4 percent in one year, but around 15 percent returns in the last six months. So far in 2024, the shares of Reliance Industries have given negative returns of about 4 percent.
About the Company:
Reliance Industries Limited is engaged in business activities spanning across hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, advanced materials and composites, renewables (solar and hydrogen), retail and digital services.
Written by Shivani Singh
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