Shares of India’s top valued company Reliance Industries Limited (RIL) outperformed the Nifty by nearly 4% in 2022.
“We forecast 18% EBITDA growth in FY24E, driven by 21% floorspace growth in retail and 24% on Jio tariff hike and home broadband traction. The valuation has moderated, underestimating green energy in our view. Borrowings are likely to increase,” the note said. Jefferies maintains its Buy rating on RIL share with target price 3,100, with an upside of over 22% from current levels.
The brokerage expects Jio to deliver 19% YoY rev growth on the back of tariff hike in the mobile segment and continued traction in the non-mobile segment. Its impact on 5G pricing/adoption and market dynamics can be monitored. The timing and quantum of the next tariff hike and Jio’s response to Bharti’s rural expansion will also be key focus areas, it highlighted.
For the O2C business, Jefferies expects a gradual improvement in petrochemical margins in 2H2023 as Chinese demand improves. “Revival of petrochemical margins to cycle-averages could add $1bn annualized to O2C Ebitda on a FY23E basis.”
Meanwhile, for retail, revenue growth remains strong at around 25% due to improved store throughput and expansion in merchant network and new commerce expected product assortment.
Mukesh Ambani chairs and runs Reliance Industries, which has interests in petrochemicals, oil and gas, telecommunications and retail. About 60% of Reliance’s revenue comes from oil-refining and petrochemicals, however, the group is reducing its dependence on oil-refining by diversifying into retail, telecommunications and technology, and also venturing into new energy business. Ambani last year unveiled plans to spend $75 billion on clean energy projects over the next 15 years.
Ambani also unveiled mega investment plans and outlined a succession plan, positioning the conglomerate for its next growth phase to double the conglomerate’s value by 2027, or what it calls the end of its golden decade.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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