Several brokerages have maintained their rating and target price on India's most valuable company Reliance Industries Ltd after the annual general meeting (AGM).
Analysts are a tad concerned about the market's disappointment due to the absence of a spin-off timeline guidance for Jio and Retail. With the AGM concluded, attention is expected to turn toward earnings, which analysts predict will now be the primary focus. Notably, their estimates are 20% lower than the consensus.
Analysts' view
Brokerage firm Jefferies India maintained a buy rating with a target price at Rs 2,950 a share, JM Financials retained its buy rating and target price of Rs 2,900 a share while Kotak Institutional Equities maintained an add rating and kept the target price at Rs 2,600 a share. Nomura retained its buy rating and kept a target price at Rs 2,925, up from Rs 2,444 a share. Macquarie Research has maintained its underperform rating and expects a target price at Rs 2,100, down 14.6 percent from current market value.
RIL had revealed board approvals for Isha Ambani, Akash Ambani, and Anant Ambani to be inducted as non-executive directors. Mukesh Ambani will remain CMD for 5 more years, focusing on nurturing and guiding the next-gen leaders, particularly his three children, while also enhancing RIL's institutional culture.
"We believe the decision to elevate the next generation of the Ambani family to the Board of RIL, enables them to further develop on their experience of running key RIL businesses and will position them well to continue driving growth for the organisation," Nomura Research said in its latest note.
Jio revealed plans for a nationwide FWA launch on September 23, and its FY25E capital expenditure is expected to decrease significantly after major 5G network investments in FY24E. The wind energy entry for ROTC's renewable supply happened as anticipated.
RIL highlighted Retail's top position in brick-and-mortar retailing but did not provide details on growth plans or the potential IPO timeline. The firm mentioned strong interest from global investors for Retail investments.
Jefferies India anticipates reduced FY25E capex for Jio, given the substantial completion of 5G network investments. The management aims to keep net debt:Ebitda below 1x. Earnings remain unaltered due to the absence of new near-term target details. No significant new capital expenditure was revealed.
Growth drivers
JM Financial holds the view that worries about net debt are excessive. They are confident in RIL's industry leading capabilities across various sectors, which they believe will support a strong 14-15% EPS CAGR over the next 3-5 years. JM project RIL's net debt to peak in FY24 and then decrease due to moderated capex (Rs 1.3-1.4 trillion per annum versus Rs 2.3 trillion in FY23), funded by increasing internal cash generation. RIL's commitment to maintaining net debt to EBITDA below 1x (0.9x in Mar'23) provides reassurance, it said.
Motilal Oswal Securities expects the company to clock a consolidated revenue/EBITDA CAGR of 12% over FY23-25. Retail, Telecom, and new energy are poised to become the upcoming growth drivers over the next two-to-three years, given the large technological advancements and ambitious growth targets.
"We value the Refining and Petrochemical segments at 7.5x EV/EBITDA, arriving at a standalone business valuation of Rs 904/share. We ascribe an equity valuation of Rs 750/share to RJio and Rs 1,485/share to Reliance Retail, factoring in the recent stake sale and an equity valuation of Rs 16/share pertaining to New energy on book value," Motilal Oswal's report added.
Nomura said the various sectors hold a positive outlook: O2C could gain from global oil demand growth of 2.2mn b/d in 2HCY23. CDU additions slightly trail demand growth by 0.5 mn b/d. Retail growth is solid due to store expansions and operational efficiency. Jio might see upsides if FY25 tariff hikes exceed expectations.
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