Reliance: When Will India's Most Valued Stock Hits Rs 3,000 Per Share Mark? Motilal Sets Big Target Price

Reliance Industries, backed by billionaire Mukesh Ambani, is the country's most valued stock in terms of market capitalisation. Reliance is at the top with m-cap of nearly Rs 18.34 lakh crore. Reliance shares hold about 9.11% weightage in Nifty, and about 13.08% weightage in Sensex. Currently, Reliance shares have witnessed a nearly 1% correction after Q3 results for FY24. The stock trades at a little over Rs 2,700 mark. But when will Reliance cross the Rs 3,000 mark?

On BSE, Reliance's share price stood at Rs 2,710.35 apiece, up by 0.81% with an m-cap of Rs 18,33,737.60 crore on January 25, 2024. In five trading sessions, Reliance stock has broadly dipped 0.8% on the BSE. The stock is in focus due to Q3 results for FY24.

During Q3FY24, Reliance's net profit, on a consolidated basis, stood at Rs 19,641 crore registering a growth of 10.9% YoY. While gross revenue stood at Rs 248,160 crore, logging a single-digit growth of 3.2% YoY. Meanwhile, its EBITDA stood at Rs 44,678 crore up by 16.7% YoY with a margin of 18% which expanded by 210 bps.

However, in Q3, O2C EBITDA saw muted growth because of planned maintenance and inspection shutdown. Oil & Gas business posted an EBITDA of Rs 5,804 crore, up by 49.6% YoY.

Motilal has set a huge target price of Rs 3,130 apiece on Reliance Industries ahead.

On segment-wise, Motilal Oswal in its note said, "Segment-wise, the Consumer business continues to post double-digit EBITDA growth, with both RJio and Reliance Retail likely to record 15%/28% EBITDA CAGR over FY24-26. The growth would be driven by the retail sector's footprint additions and new categories, while the telecom business continues to focus on subscriber growth. In O2C, we see refining and petchem segments picking up from the current levels, as net capacity additions for both segments are tapering off on a YoY basis. Moreover, FY25 would see the full benefit from the ramped up volumes at the MJ Field."

Further, Motilal's note said, "We value Reliance Retail's core business at 35x EV/EBITDA on FY26E and connectivity at 5x to arrive at our valuation of INR1,732. Reliance Retail's value in RIL shares comes to INR1,523/sh (for its 87.9% stake). Our premium valuation multiples capture the opportunity for rapid expansion in its retail business and the aggressive rollouts of the digital platforms."

Also, Motilal broadly kept its estimates unchanged for FY25/FY26, factoring in 11%/ 15% revenue/EBITDA CAGR during FY24-26. RJio is valued at an EV/EBITDA multiple of 12x on FY26E EBITDA. The potential tariff hikes, market share gains from VIL, and opportunities in Digital offer an option value of INR120, thereby arriving at a valuation of INR810/sh (adjusted for its 66% stake).

Moreover, Motilal's note said, "We model a capex of INR450b for FY25 and FY26 in the Standalone business, considering RIL's investments in new-age greener businesses (such as solar energy and a hydrogen ecosystem in India)." Adding it said, "We have built in an FY24/25 capex of INR1.2t/INR900b, modeling INR400b/ INR310b in Telecom, INR550b/INR450b in the Standalone business and the rest in Others, considering RIL's investments in new-age greener businesses."

On the valuation, Motilal's note said, "Using SoTP, we value the Refining and Petrochemical segment at 7.5x FY26E
EV/EBITDA to arrive at a valuation of INR976/share for Standalone. We ascribe an equity valuation of INR810/share to RJio and INR1,523/share to Reliance Retail and INR37/share towards the new energy business We reiterate our BUY rating with a TP of INR3,130."

There is a potential upside of 15-16% in Reliance Industries.

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