Reliance Industries Ltd stock has received bullish calls from brokerages, buoyed by strong growth prospects of its telecom unit and a likely rebound in the energy business, following the company’s fiscal first-quarter earnings.
Nomura has a ‘buy’ call on Reliance Industries stock, with a price target of Rs 3,600, implying about a 16 percent upside from the last closing price. Nomura analysts said Reliance’s O2C (oil-to-chemicals) business “delivered well in a challenging environment”. They also said that the operational trends remain strong for Reliance Industries, citing the rise of 20 basis points in overall margins year-on-year.
On July 19, Reliance Industries reported an 11.5 per cent increase in revenue to Rs 2.58 lakh crore in the first quarter of the current fiscal from a year ago, bolstered by contributions across segments. Consolidated EBITDA rose 2 percent from the year-ago period to Rs 42,748 crore. However, the O2C business EBITDA declined.
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Even so, Reliance’s O2C business results were in line with the expectations, according to Jefferies. Further, Reliance Industries said that strong contributions from consumer and upstream businesses offset the weak O2C operating environment.
Among consumer businesses, Reliance’s Jio results too met expectations, Jefferies added. “Jio should see strong growth on the back of the tariff hike,” it said. Jio Platforms’ revenue from operations rose 12.8 percent from a year earlier to Rs 29,449 crore in the quarter ended June 30. The segment’s EBITDA increased to Rs 14,638 crore. The company said the average revenue per user (ARPU) was Rs 181.7, with a better subscriber mix.
Jefferies and Morgan Stanley too have ‘buy’ and ‘overweight’ calls on RIL shares, with price targets of Rs 3,525 and Rs 3,540, respectively. The energy and telecom segments should see a rebound in coming quarters, Morgan Stanley said.
Reliance’s retail business revenue grew by 6.6 percent, and EBITDA rose to Rs 5,664 crore. “The management is rationalising unprofitable parts in retail with a focus on margins,” Jefferies said. Reliance’s pivot in retail to focus on margin amid weak domestic demand stands out, Morgan Stanley said.
Macquarie has a ‘neutral’ call on Reliance Industries stock, with a target price of Rs 2,750 per share. The company’s follow-through on capex discipline and free cash flow improvement would be positive.
RIL’s capital expenditure for the quarter stood at Rs 28,785 crore, comfortably covered by a cash profit of Rs 33,757 crore.
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