Motilal Oswal Institutional Equities has a "buy" call on the stock of Reliance Industries post the company's annual general body meeting. The firm sees an upside target of Rs 2,430, which is almost 15% from the current levels.
Key highlights of the AGM
According to Motilal Oswal Institutional Equities following were the key highlights of the AGM.
a) H.E. Yasir Al-Rumayyan (Chairman of Saudi Aramco and Governor of PIF) joined the board of RIL, a precursor to Aramco's formalization of its investment in the O2C business. b) It would invest Rs 750 bilion in new green energy (solar- and hydrogen-based energy) over the next three years. c) It aims to launch JioPhone Next by 10th Sep'21 and aggressively ramp up Jio Fiber as well as the 5G technology and ecosystem development. d) It is planning investments in new commerce, and targets 10m merchant/kirana partner additions and growth of >3x over the next 3-5 years.
"Using SOTP, we value the O2C business at FY23E EV/EBITDA of 7.5x, arriving at a valuation of INR764/share for the standalone business, and add Rs 68 for the E&P assets. We ascribe an equity valuation of a) INR847/share to RJio on FY23E 20x EV/EBITDA and b) Rs 755 per share to Reliance Retail on FY23E 35x EV/EBITDA, factoring in the recent stake sale. We reiterate Buy, with a target price of Rs 2,430 per share. The higher multiple for the Digital business captures the revenue opportunity, potential tariff hikes, and opportunity in the Feature Phone market. The higher multiple for the Retail biz captures the acceleration in store openings, digital commerce, and the new JioMart platform," the brokerage has said.
Opportunities in retail and digital
"Reliance Industries (RIL), in its AGM held on 24th June'21, announced a change in gears with the introduction of its New Green Energy business, with large-scale capex planned for the same. It also continues to focus on the next-gen opportunities in Jio Digital and Reliance Retail," the brokerage has said.
Views mentioned herein are taken from the brokerage report of Sharekhan. Neither the author, nor the brokerage nor Greynium Information Technologies would be responsible for losses incurred based on the article. Please consult a professional advisor. Investing in stock markets is risky.