RIL share price: Analysts shrug off Aramco pause, project 17% upside for RIL stock

Mumbai: Brokerages on Dalal Street cheered Reliance Industries’ (RIL) 43rd another annual general meeting held on Wednesday that was filled with big-bang announcements, a trend of sorts that chairman Mukesh Ambani seems to have set over last few years.

Even as the investors were disappointed by a lack of progress on a deal with Saudi Aramco, analysts remain quite bullish and see an upside of 17 per cent for the stock from current levels.

Ambani at the AGM informed shareholders that the Saudi Aramco deal did not proceed as per the timeline, following which the stock corrected 7 per cent from its record high. This did not deter analysts who focused on the ambitious plans set out for Jio Platforms in the backdrop of record fund raising from marquee investors, including from search engine giant Google, who will pick a 7.7 per cent stake in the unit.

Shares of the country’s most valued company currently trade at Rs 1,839.15 and have more than doubled from their March lows.

HSBC raised its price target on RIL stock to Rs 2,020 from Rs 1,880 earlier while maintaining its buy rating on the stock.

“With each of its businesses now capable of generating cash flows for themselves, we believe RIL will once again become a cash generating machine, thus allowing it to chart its next phase of growth,” HSBC analysts said in a note.

Kotak Institutional Equities maintained its buy rating on the stock with a fair value of Rs 2,150.

Ambani, India’s richest man, also announced the development of an affordable smartphone in partnership with Google. He also said Jio Platforms has designed and developed a complete 5G solution from scratch.

He unveiled an ambitious path ahead for Jio and said he expects to add 500 million subscribers over next 3 years, and announced a bunch of new initiatives such as Jio Glass, Jio Tv+, healthcare and online education app and a host of other steps for the company’s retail business.

RIL currently has 17 strong buy, 7 buy, 3 hold, 4 sell and 1 strong sell rating, data from Reuters showed.

BofA Securities too raised its target on the stock to Rs 2,040 from Rs 1,940 earlier while reiterating its buy rating.

“We see key catalysts for RIL intact: (1) potential stake sale in O2C business to Aramco; (2) retail business stake sale to strategic &/or financial investor; (3) potential acquisition of retail companies; (4) Material uptake of e-grocery/new commerce & integration of JioMart in Whatsapp; and (5) ARPU uptake at Jio or any government relief to the telco sector,” BofA analysts said.

The brokerage also expects Jio to have access to 500 million mobile users, 20 million households and 10 million SMEs over time.

“Furthermore RIL has also India’s biggest physical retail stores. Such a wide reach of users & merchants allows RIL to have clear and demarcated non-overlapping partnerships with each of them,” BofA analysts said in a note.

Nomura maintained its buy rating on the stock with a target price of Rs 1,900.

Morgan Stanley maintained its overweight rating on the stock, with a target price of Rs 1,801.

The brokerage pointed out that more than the first half of the AGM was dedicated to the growing digital ecosystem and with it, the importance and focus of Jio for both RIL and India’s digital ecosystem came to the fore.

Goldman Sachs maintained its buy rating on the stock with a target price of Rs 1,775 and said Refining, petrochemical and telecom are the key drivers of our valuation, accounting for around 62 per cent of our enterprise value.

RIL announced a US$4.5 bn investment in Jio Platforms from Google, with the initial focus being on developing low cost 4G/5G smartphones.

“We note India currently has 300 mn+ 2G devices, and lower-priced devices could help drive 4G adoption. Jio already has 100mn+ JioPhones (4G feature phones), and we believe incremental subscriber growth for Jio is likely to come from this segment, given slower smartphone adds for the industry (affordability acting as a stumbling block in our view – India has 450 mn smartphone users),” Goldman Sachs analysts said in a note.

Motilal Oswal too reiterated its buy rating on the stock with a target price of Rs 2,020.

Among other things, the brokerage was upbeat on the prospects of Jio and said that apart from Arpu (average revenue per user) increase and market share gains, the company has additional earnings opportunity from its ambitions in JioFiber and other digital avenues.

“Furthermore, RJio’s lower debt and market leadership position increase our conviction in the company. Thus, we believe it should garner premium valuations as compared to competitors,” the brokerage said in a note.

Centrum maintained its buy rating on the stock and raised the target price by 21.7 per cent to Rs 2,015.

“Overall, with zero net debt objective having been achieved ahead of time, game-changing partnerships with the big three (Facebook, Google and Microsoft) and expectations of similar value unlocking now starting in retail, RIL stands on a strong footing over the next 5-7 years,” Centrum analysts said.

Credit Suisse meanwhile, maintained its neutral rating on the stock, with a target price of Rs 1,690.

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