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Bernstein bumps up Reliance stock target price, forecasts 34% upside

The research house increased its stock target price to Rs 3,360 from Rs 2,830, maintaining ‘outperform’ rating

June 29, 2022 / 10:30 AM IST

Bernstein Research sees 34 upside in Reliance Industries saying the company is showing strength across segments, and poised to be even stronger. It sees higher earnings growth potential than what the consensus estimates suggest.

The research house has increased its target price on the stock to Rs 3,360 from Rs 2830, maintaining an ‘outperform’ rating. It has valued the company on the basis of FY23 expected earnings per share of Rs 154 which is 29 per cent above consensus estimates.

The target is the highest among all analysts covering the stock. The 12-month target on the stock ranges from Rs 1,850 to Rs 3,360, with consensus rating being 'buy'.

“Reliance continues to be a core holding for any portfolio looking to take advantage of the secular growth in the Indian economy,” said Bernstein's Neil Beveridge. “Refining has been exceptional with record margins and expansion of the O2C business into downstream chemicals which still

has decades of growth ahead. The build out of JioMart and omni-channel presence, scaling up of the Jio platform, and investments in new energy to accelerate energy transition will all contribute to growth”

He said with Reliance in the midst of a secular growth phase, he expects the combined operating profit for the four businesses to increase at a compound annual rate of 20 per cent in the next four years.


On Wednesday, shares of Reliance traded marginally down at Rs 2,512.70 apiece.

Surging refining margins

In the near term, the biggest positive for the stock is surging refining margins. Despite the company’s forays into other verticals, the oil refining business is the cash cow, generating most of the revenue.

Benchmark Singapore complex refining margins are trading at a record $36 per barrel in June. Diesel, gasoline, and kerosene crack spreads are at a historical high of $44, $26, and $39 per barrel, respectively, with no short term relief.

Bernstein said refining margins for Reliance Industries could rise to record levels – $25.5 per barrel in FY23, up from $9.8 per barrel in FY22, with supply shortage and lower feedstock prices.

Reliance has also taken advantage of cheaper Russian crude. Urals (the Russian oil grade) is trading at a 20-25 per cent discount to Dubai oil price, yielding an additional $6-8 per barrel spread on refining margins. But this may not be sustainable given increased scrutiny, said Beveridge

Key risk ahead is a recession that leads to a sharp decline in margins next year.

Other drivers

Bernstein said in the telecom business, the stage is set for more tariff hikes driven by stable industry structure and government reforms. Thus Jio is set to deliver strong results driven by tariff hikes.

Similarly, Reliance Retail’s growth outlook has improved as the economy opened up with footfall reaching 104 per cent of pre-Covid levels. Store additions have also remained strong, Bernstein added.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
Shubham Raj
first published: Jun 29, 2022 10:05 am
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