RIL Q2 Revenue Gains 33%, Buy Reliance Industries Stock For Sharp Return: Top Brokerage Says

In Q2 FY23, Reliance Industries reported that its net profit stood at Rs. 13,656 crore as against Rs. 13,680 crore in the year-ago quarter. Its revenues gained by 33.7% to Rs. 2.32 lakh crore, which was led by strong performance of the oil-to-chemical, telecom and retail operations. Ashika, a top brokerage firm suggests investors buying the stock of Reliance Industries (RIL).

Stock To Buy: Target Price

The Current Market Price (CMP) of Reliance Industries (RIL) is around Rs. 2,450. Ashika has estimated a Target Price for the stock at Rs. 2,850. This stock has the potential to give a 16.30% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 1,672,230 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 2,450
Target Price	Rs. 2,850
Potential Upside	16.30%
52-week high share price	Rs. 2,856.15
52-week low share price	Rs. 2,180.00

Further expansion plan

RIL's energy business is one of the best in class, with the highest complexity globally and the lowest cost structure thus enabling the company to have stable and higher margin profile as against peers. In recent AGM, the company has put in motion a Rs. 4tn (US$ 50bn) investment plan entailing, among others, a proposed fast-track nationwide 5G rollout, restart of growth investments in the oil-to-chemicals (O2C) business, and targets for solar and battery giga factories

Additionally, RIL mentioned that it will demerge its financial services business. It will be listed separately on the stock exchanges under Jio Financial Services Ltd.

Stock Upside

According to Ashika, "Leveraging B2B growth and other online formats (eg, JioMart, Ajio), Retail added the highest number of new stores and sq. ft. space in FY22 and the trend is expected to continue in FY23-24. Retail now accounts for a fourth of RIL's total revenue in FY22 from just 10% in FY16-17. In the past decade, Reliance Retail's international brand partnerships have risen threefold- from 14 in FY12 to 47 in FY22."

Digital Business

RIL plans to launch 5G services in key cities by Diwali (Oct'22) and scale up to nationwide rollout (1,000 cities) by Dec'23. Expansion of broadband to 100mn homes and MSMEs could mean a much faster rise in average revenue per user (ARPU) between FY22&FY25. RIL's ARPU is already on a rise and reported at Rs. 175.7 in Q1FY23, against Rs 167.60 in the previous quarter, a jump of 4.8% QoQ. n Q1FY23, digital and new commerce grew more than twice over last year and contributed about 19% of gross revenue for Reliance Retail. The arm continues to on-board new merchants and order in its platforms.

Intends to enter FMCG business

RIL has announced its intention to enter the FMCG business, focusing on high quality affordable products for daily needs. RIL took a step in that direction with its recent acquisition of iconic '70s soft drink Campa Cola. Reliance Retail is known to deeply undercut its rivals with its private-label FMCG brands which it currently sells at its Reliance Fresh and Reliance Smart supermarkets and hypermarkets. The company might take its products to the General Trade channel and together with its focus on digital and new commerce space, it could be a winning formula.

Disclaimer

The above stock was picked from the brokerage report of Ashika. 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.