Analysts at Jefferies have a bull case price target of Rs 3,150 for the stock. In the base case scenario, the upside target stands at Rs 2,540 (potential upside 22 per cent) while the bear case target stands at Rs 1,850 (potential downside 11 per cent).
Jefferies said five things
are necessary for the bull case scenario to play out:
- Completion of Aramco deal O2C business, which will re-rate its multiples
- Recovery in GRMs should be ahead of its estimates
- Faster consolidation in telecom leading to tariff increase for Jio
- Possible public listing of Jio that will give a re-rating to valuation multiple
- Faster-than-expected market share gain for Reliance Retail
Chairperson Mukesh Ambani told the company’s annual general meeting this past fortnight that the Aramco deal will likely be completed by the end of this financial year. The company plans to include the Aramco Chairman on the board of RIL as independent director.
Ambani expects its retail venture to run on a hyper-growth trajectory to grow at least three times over the next 3-5 years. He also announced a new green energy business, that will lift RIL’s ESG profile and bring it into an emerging business.
“Given the early stage nature of the technology, RIL’s portfolio strategy for the renewables (RE) foray can ensure its success. The government policy support for RE and capital subsidy schemes would improve the investment economics. RIL’s balance sheet can adequately fund the capex. We see RIL emerging as India’s most credible RE player going forward,” said Bhaskar Chakraborty, Equity Analyst at Jefferies.
Other analysts said RIL has a sustainable competitive advantage on scale economics, cost leadership, financial strength and is likely have recurring positive free cash flow (FCF) from FY22 onwards. The company has also turned a Rs 2 lakh crore FCF invested in the consumer businesses into Rs 9 lakh crore in equity value.
Reliance has more new growth engines with large addressable markets, especially with Jio and e-commerce under Reliance Retail. There are also interesting options with a likely foray into the financial services and from its partnerships with Facebook and Google.
“We see RIL emerging as the most credible Indian renewable player in the next two years. Its ESG scores will improve meaningfully and attract money from ESG funds globally,” Chakraborty said.
