Buy Reliance Industries; target of Rs 3130: Sharekhan

Sharekhan's research report on Reliance Industries

Q3FY24 consolidated EBITDA of Rs.40,656 crore (down 0.8% q-o-q) beat our estimate by 2% primarily led by EBITDA beat across standalone, retail and Jio. Oil & gas segment’s EBITDA was up 21% q-o-q led by higher gas production while that of O2C declined by 21% q-o-q to Rs. 11,069 crore. Retail sustained growth momentum with 8% q-o-q revenue growth/stable margin of 8.1% and thus retail EBITDA grew by 8% q-o-q to Rs. 6,061 crore. Jio EBITDA up 3% q-o-q but flat ARPU of Rs. 181.7, disappointed. Strong growth in retail given store expansion, potential telecom tariff hike/5G adoption and relatively stable O2C business (along with likely recovery in petchem) to drive earnings growth (expect 15%/14% EBITDA/PAT CAGR over FY23-26E) for RIL. New Energy Giga Complex to be commissioned in H2CY24 and would drive long-term growth.

Outlook

We firmly believe that RIL is a compelling long-term investment bet given strong prospects across businesses and potential value unlocking from retail, digital services, and financial services portfolio would create long-term value for shareholders. We maintain a Buy with a revised SoTP-based PT of Rs. 3,130. At CMP, the stock trades at 19x its FY26E EPS and 9.2x its FY26E EV/EBITDA.