Large-Cap Stock To Buy: Reliance Shares Well-Poised For 10% Potential Upside, PL Suggests Buy

Reliance Industries (RIL), the largest company in India in terms of market share, has multiple positive parameters, says Prabhudas Lilladher's expert. RIL shares are well-placed for further fresh upward move, and hence, the brokerage has suggested buying or accumulating Reliance shares for a target price of Rs 2,600. In the trading week that ended on November 17th, RIL shares rose by 2% on BSE.

Last week, on Friday, the share price ended at Rs 2,355.85 apiece, down by 0.32% on BSE with a market cap of nearly Rs 15.94 lakh crore. However, RIL's weekly gains were positive with at least a 1.98% upside.

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock has indicated multiple positive parameters with a breakout above the falling channel pattern, a move past the long-term trendline resistance zone on the daily chart at 2350 level and also the breach above the significant 50EMA level of 2347 indicating strong bias and anticipating for further fresh upward move."

She added, "The RSI has indicated a trend reversal from the oversold zone and currently is well placed indicating strength to carry on with the momentum still further ahead from current levels. With the chart looking good, we suggest buying and accumulating the stock for an upside target of 2600 keeping the stop loss of 2260."

Recently, CRISIL Ratings assigned its 'CRISIL AAA/Stable' rating on the proposed non-convertible debenture of Reliance and reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the existing debt instruments and bank
loan facilities.

RIL's consolidated operating performance remained healthy for the first six months of fiscal 2024, with 16.8% y-o-y growth in operating profitability while revenue contracted by 1.7% as revenue from oil to chemical (O2C) segment decreased owing to a reduction in crude oil prices. The operating profitability was supported by continuing growth in the retail and digital service segment. The consolidated earnings before interest, tax, depreciation, and amortization (EBITDA) stood at Rs 86,849 crore for the six months ended September 2023 as compared to Rs 74,382 crore in the corresponding period of the previous fiscal, CRISIL's note said.

Also, the ratings continue to reflect RIL's leadership position and strong competitiveness in the O2C business, leadership position attained by Reliance Jio Infocomm Limited (RJIL; 'CRISIL AAA/Stable/CRISIL A1+') in the telecommunications (telecom) industry and by Reliance Retail Ventures Ltd (RRVL; 'CRISIL AAA/Stable/CRISIL A1+') in the retail industry, along with its exceptional financial flexibility, it added.

Further, CRISIL Ratings has withdrawn its rating on NCDs aggregating Rs 22,205 crore (see annexure 'Details of Rating Withdrawn' for details) on receipt of requisite documents. The withdrawal is in line with CRISIL Ratings' rating withdrawal policy.

In Q2FY24, RIL earned a consolidated net profit of Rs 19,878 crore, registering a growth of 29.7% YoY, while EBITDA also recorded a robust growth of 30.2% YoY to Rs 44,867 crore. EBITDA margins accelerated by 390 bps to 17.5% in Q2FY24 as against 13.6% in Q2FY24. However, the company's revenue saw a timid performance to Rs 255,996 crore, up by a meagre 1.2% YoY. The company's CAPEX for the quarter was at Rs 38,815 crore ($ 4.7 billion) with continuing accelerated investments in pan-India 5G roll-out.

Taking into consideration the current price level and PL's target price, Reliance has the potential of at least a 10.4% upside on BSE in the medium term.