Buy Reliance Industries Stock For A Price Of Rs 3050, Says Sharekhan Post AGM

Broking firm Sharekhan has suggested buying the stock of Reliance Industries for a price target of Rs 3050 in its latest brokerage report. The broking firm, takes into account the latest plans as unveiled by Reliance Industries in its AGM.

Reliance Industries: 3 important announcements

Reliance Industries Limited's AGM made three important announcements according to Sharekhan. The first was the succession plan for the respective business of Jio, retail, and new energy. The second was the capex plan (Rs. 2 lakh crore for 5G and Rs. 75,000 crore each for O2C and new energy), and the last was the plan to launch the FMCG business to augment retail business growth. "In our view, the clear succession plan for each business is important for building a leadership team for sustained growth (RIL targets to double its value by the end of 2027)," the brokerage has said.

Aggressive capex plan across businesses

RIL unveiled its capex plan across its key business of Jio (Rs. 2 lakh crore for 5G), O2C (Rs. 75,000 crore), and new energy (Rs. 75,000 crore already announced last year). For Reliance Retail, the company announced to launch the FMCG business but has not given details about the investment. Jio capex is focused on 5G network (Stand-Alone 5G, which has zero dependency on 4G network, and announced the launch in four metros by Diwali with pan-India launch target by December 2023).

Investment in Oils to chemicals was a surprise

Investment of Rs. 75,000 crore in the oils to chemicals business according to Sharekhan was a surprise with capacity expansion for PTA/PET/ Polyester by 2026, capacity expansion of EDC/PVC at UAE, and carbon fibre (capacity of 20,000 tonne) plants by 2025.

New energy business

According to Sharekhan Reliance Industries AGM has clearly outlined the plan to build capacity and timeline for the start of production across the key value chain in the new energy business. "The 10GW solar PV cell and module facility is expected to start production by 2024 with a target to scale up to 20GW annually in phases, green hydrogen production to commence by 2025, battery packs by 2023 (targets to scale up to 5 GWh/50 Gwh by 2024/2027), and lastly 20GW solar energy generation capacity by 2025 for captive consumption. New energy investment plan of $10 bn is inline with RIL's long-term vision to become net carbon zero by 2035 and is expected to create long-term value for RIL," the brokerage has said.

Buy for a price target of Rs 3050

Sharekhan has said that further, potential value unlocking in digital and retail (with a likely IPO for consumer business) would add value to shareholders' return over the coming years. "Hence, we maintain Buy on RIL with an unchanged SoTP-based price target (PT) of Rs. 3,050. At the current market price, the stock trades at 22.3x/17.8 its FY2023E/FY2024E EPS and 10.8x/9x its FY2023E/FY2024E EV/EBITDA," the brokerage has said.