RIL shares are down 11% since Jio Financial went public, and the market capitalization has dropped Rs 1.9 lakh crore.

Nomura India, a foreign brokerage firm, said that RIL’s good access to crude oil will keep realised margins at a large premium to benchmark margins.

Reliance Industries Ltd (RIL), India’s most valuable stock, hasn’t done as well as the BSE benchmark Sensex. Since the separation of Jio Financial Services (JFS), RIL has dropped 11%, while the 30-pack index has only dropped 3%.

The company run by Mukesh Ambani saw its market capitalization (m-cap) drop from Rs 17,72,585 crore on July 20 to Rs 15,83,122 crore at the end of trading on Thursday. This was the day that the oil-to-telecom major turned ex-date for the separation of its financial services business (JFS shares started trading on August 21).

Since then, a few brokerages have said what they think about Reliance Industries stock and given goal prices in the range of Rs 2,600–3,000.

Nomura India said this week, “We keep our ‘Buy’ rating for RIL because it is best positioned to gain from a strong refining structure. We also note upside risks to our conservative refining margin estimates of $12 per barrel for FY24.”

Nomura India said that every dollar increase in refining margins affects Ebitda by 2% and earnings per share (EPS) by 4% for Reliance Industries. The foreign brokerage said that RIL’s good access to crude oil will keep realised margins at a large premium to benchmark margins.

Morgan Stanley said in a note on September 20 that Reliance’s rounds for making money are getting shorter (2–3 years vs. 5–6 years in the past), while investments in new growth areas are getting bigger.

According to a letter from the company, “this maintains dollar profits growth in the 13–15% CAGR growth range during cycles and steadily enhances returns.” Morgan Stanley said that RIL’s supply-side problems should keep refining margins high. They also said that more people are signing up for internet and that gas production is going up.

“E-commerce has gained momentum, and consumer retail is enjoying good traction with store additions. We think that clean power will add $20 billion to NAV. Over the next few quarters, RIL is on the verge of a monetisation cycle and a rise in capital expenditures, the report said.

The stock is aimed at a price of Rs 2,821 by this company. Jefferies still recommends buying the stock and has set a goal price of Rs 2,950.
The price goal for the stock is Rs 3,015 at BOB Capital Markets, Rs 2,898 at Prabhudas Lilladher, and Rs 2,650 at ICICI Securities. Kotak Institutional thinks that Rs 2,600 is a fair price for the stock.

Trendlyne says that the average goal price for the stock is Rs 2,796, which means that it could go up by 20%.

Recently, key investors like QIA and KKR bought shares in Reliance Retail Ventures, which is the retail arm of the company. There are also rumours that ADIA wants to put $600 million into the retail side of the business. Motilal Oswal said that the latest deal proves how well Reliance Retail is valued.

“We put a value of 7.5 times EV/Ebitda on the refining and petrochemical segments, which gives us a value of Rs 904 per share for the independent business.” Taking into account the latest stake sale, we value RJio’s equity at Rs. 750 per share and Reliance Retail’s at Rs. 1,485 per share. Based on book value, we value New Energy’s equity at Rs.16 per share. Last month, a local brokerage said, “We keep our BUY rating and our goal price of Rs 2,920.”

Ajith Kumar

Ajith Kumar

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