This Bluechip Stock Gave Multibagger Returns in 5 years, ICICI Direct Says Buy For Robust Gains

ICICI Direct has picked Reliance Industries Limited (RIL) in its Oil & Gas Sector report published on January 10, 2023. The brokerage recommended buy the stock with an estimated target price of Rs 3,050/share to the stock. The stock purchased at the current market price would lead to a gain of up to 20%. RIL is a large-cap company that operates in diversified sectors. The company has evolved from being a textiles and polyester company to an integrated player across energy, retail, materials, entertainment and digital services. It is a bluechip stock having a market capitalisation of Rs 17,31,011 crore.

Stock Outlook & Returns

The current market price (CMP) of RIL on NSE stood at Rs 2,558.40/share, down 1.48% from its previous close. On April 29, 2022, the stock hit its 52-week high at Rs 2,856.15/share, whereas, its 52-week low was recorded on 8 March 2022 at Rs 2,180/share. .

The stock in 1 month fell 1.94% and grew 6.34% in the last 3 months, respectively. It grew 4.94% in the last 1 year. It gave 65.31% positive returns in the last 3 years. It gave 171.49% multibagger returns. 

Revision in gas prices to lift upstream earnings...

Brokerage in the report has stated, Domestic gas prices were revised from October 1 onwards from US$6.1/mmbtu to US$8.57/mmbtu on a GCV basis for ONGC. Similarly, the ceiling price for Reliance Industries was increased from US$9.92/mmbtu to US$12.46/mmbtu (GCV basis). Thus, net gas realisations of upstream companies are estimated to improve QoQ. On the crude oil front, oil prices declined in Q3FY23 amid demand concerns from China. Average crude oil prices declined by US$10.8/bbl QoQ to US$88.3/bbl. On a closing basis, crude oil prices were around US$84.97/bbl. Fall in crude prices along with windfall taxes would cap the net oil realisation of upstream companies such as ONGC at ~US$75/bbl. However, on account of increase in gas prices, we expect ~8% QoQ increase in operating profit for ONGC. For Reliance Industries' oil & gas segment, we expect a ~14% QoQ increase in EBITDA.

ICICI Direct's view on the RIL

According to the brokerage, RIL's consolidated EBITDA is estimated to increase 9.7% QoQ to Rs 34249.2 crore. Reliance Jio (Jio) is expected to lead sub addition with ~6 mn net sub additions during Q3. The monthly ARPU, like peers, will witness modest growth, driven by mix improvement, at ~1.5% QoQ at Rs 180. Overall revenues are expected at Rs 23206 crore, up 3% QoQ. EBITDA at Rs 11,944 crore, is likely to grow 4% QoQ. Overall EBITDA margins are expected at 51.5%, up 50 bps QoQ and net profit at Rs 4624 crore, up 2.3% QoQ. Key monitorable: Commentary on ARPU trajectory, Jio Fiber. "We expect Reliance Retail to report healthy operational performance in Q3FY23E with revenues increasing 22% YoY to Rs 70461 crore (up 8% QoQ). Core retail revenues (excluding connectivity) is expected to increase 24% YoY led by strong recovery in fashion and grocery segment. EBITDA excluding other income (the base quarter had other income worth Rs 300 crore) to increase by 32% YoY to Rs 4650 crore with margins at 6.6%. Improvement in GRMs is expected to lead to growth of 5.3% QoQ in O2C EBITDA to Rs 12607 crore. E&P EBITDA is expected to improve 14.4% QoQ to Rs 3626.2 crore on account of revision in gas prices," the brokerage has commented.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.