Reliance Industries Ltd unveiled plans to double the conglomerate’s EBITDA over the next five years at its 47th annual general meeting, buoying investor sentiment.
The drivers that will propel the Mukesh Ambani-led conglomerate towards doubling EBIDTA by 2030 include expansion in the oil-to-chemicals business, aggressive digital and retail pushes, and a renewed focus on new energy ventures.
Reliance Retail
With announcements shared across RIL’s sectors, the consumer-centric businesses continue to post double-digit EBITDA growth. According to brokerage Motilal Oswal, both RJio and Reliance Retail are likely to record 25% and 19% EBITDA CAGR over FY24-26, respectively.
“The growth would be driven by footprint additions, new categories in the retail sector, a focused approach to subscriber growth, and tariff hikes in the telecom business,” the brokerage said.
Reliance Jio
According to Jefferies, the AGM largely focussed on Jio, with the traction in Airfiber and a foray into data centres.
While Jio forms 8 percent of the total global data market, its data prices are a fourth of the global average and a 10th of developed countries. The current 5G adoption at 130 million-plus users will only rise as all smartphones over the price of Rs 8,000 each are 5G compatible, brokerages said. The 2G to 4G addressable market is over 200 million people.
New Energy, O2C
At the AGM, RIL Chairman Mukesh Ambani announced that the New Energy business will match the profitability of the current O2C segment within the next 5-7 years. O2C is Reliance Industries’ largest profit base currently, contributing towards two-fifths of the EBIDTA and more than half of attributable PAT.
RIL will invest Rs 75,000 crore in developing an ecosystem for the new energy economy, leading international brokerage CLSA to note that the conglomerate was prioritizing investments across O2C and New Energy.
“In O2C, we see Refining and Petchem segments picking up from the current levels. Moreover, FY25 would witness the full benefit of the volume ramp-up at the MJ Field,” noted Motilal Oswal.
Also Read | Mukesh Ambani predicts new energy earnings to match O2C division in 5-7 years
Valuations
Based on the AGM commentary, if execution is flawless and timelines are met, RIL’s share price could see an upside of 15-20 per cent over Emkay Global’s target price of Rs 3,335 per share. “The company targets ensuring its balance sheet remains robust,” said the brokerage.
Nuvama retained its buy call, as RIL’s New Energy rollout shall not only add 50 percent-plus to profits but also re-rate valuations, including the O2C business, given its net zero-carbon target by 2035.
Nomura noted that Reliance Industries’ EBITDA CAGR will be further boosted by a sharp increase in FCF generation and a sharp decline in net debt levels.
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