ICICI Securities Revises Target Price For Reliance Industries, Recommends To 'Add' Stock

Top brokerage firm ICICI Securities revises the target price for Reliance Industries Ltd. and has given an 'add' rating to this stock. Reliance Industries (RIL), in its latest AGM on August 29, announced a slew of new initiatives across businesses, along with the rolling out of the 5G network from October 2022 in key cities, and 5G will be rollout pan-India by December 2023. It also announced a massive new investment worth around Rs. 1.1trn in the digital services space.

Stock To Buy: Target Price

The Current Market Price (CMP) of Reliance Industries is Rs. 2,581.80 (as on September 8). ICICI Securities has estimated a Target Price for the stock at Rs. 2,755. This stock has the potential to give a 6.7% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 1,744,894 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 2,581.80
Target Price	Rs. 2,755
Potential 1 year return	6.70%
52 week high share price	Rs. 2,856.15
52 week low share price	Rs. 2,180

Financial Result

The company's revenue in FY22 was recorded at Rs. 7,216 bn, which is expected to be at Rs. 8,669 bn in FY23. Their Net Income in FY22 stood at Rs. 579 bn, which is expected to be at Rs. 863 bn in FY23.

RIL's aggressive plans for Jio/OTC and green energy create a clear roadmap for growth over FY22-27E, but the sharply higher Capex reinforces our cautious stance on returns from the business, with muted FCF yield, depressed return ratios and strong multiples limiting upsides from here, ICICI says.

Aggressive capacity expansion

RIL announced a material Rs. 750bn worth of investment in aggressive capacity expansion across PTA/PET/Vinyl PFY and PSF chains. The retail business is also seeing continuous momentum, with sustained growth in both offline and online parts of the business. RIL also announced its formal entry in the FMCG segment. Its 'Green Energy' plans are also progressing, with the first 10GW Giga solar factory targeted for commissioning by CY24 and further (10GW) to 20GW by CY26.

Petrochemical expansion

RIL threw up a surprise on downstream chemicals front, with a material Rs750bn investment in the expansion of capacity for PTA (3mt), Polyester Filament Yarn (PFY) and Polyester Staple Fibre (PSF) of 1mt, PVC (1.5mt) and EDC + PVC capacity expansion in UAE as part of the ADNOC/ADQ JV. Post the completion by CY26, RIL will be amongst the top 5 producers of PVC in the world, the brokerage firm said.

Renewable energy business

ICICI Securities mentions, RIL is in the process of setting up a manufacturing ecosystem for its four planned Giga factories in Solar, Energy Storage, Fuel cells and Green Hydrogen. It also announced a new giga factory for power electronics and software systems to support the requirements of the other four factories. The company is targeting start up by CY24 for the first 10GW solar capacity and 20GW by CY26.

Stock Advantages: ICICI Securities

According to ICICI Securities, "We make minor reductions to FY23-24E EPS by ~1% and TP by ~2% to factor higher capex and hence, higher depreciation costs and higher interest costs. We remain cautious on upsides with our concerns on low return ratios, muted FCF yields and limited potential for any return of cash to shareholders keeping risk-reward balanced. We reiterate Add on the stock with a revised Target Price of Rs. 2,755/share."

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.