Shares of Reliance Industries (RIL) fell for the eighth straight session on Monday to eventually settle a tad above Rs 2,200 level. Jefferies in a note said that the oil-to-telecom major has corrected steeply since November, bringing valuations to a discount to long term average. The brokerage is positive on the stock’s prospects and has a target of Rs 3,100 on the counter.
On Monday, RIL shares settled at Rs 2,201.60. The Jefferies target suggests a 40.90 per cent potential upside on the counter. JPMorgan also last week felt RIL shares offer good entry point but revised its March 2024 price target for the stock to Rs 2,960 from January 2024 price target of Rs 3,015 earlier.
Jefferies said investors are concerned over slower growth in the retail segment despite rapid floor space addition. Besides, it said investors are concerned over large rise in capex and rising debt level.
Jefferies expects steady growth in retail segment in FY24; it expects capex should peak in FY24 and said Reliance Industries’ balance sheet looks comfortable to fund growth. Jefferies said the O2C segment has little risk to its estimates and said the current market price implies little value to new businesses.
“We see limited downside to earnings, with tariff hike expectations pushed out to end-CY23. Fwd earnings multiples are the lowest since Covid, and is at a discount to the 5-year average tariff hike, acceleration in retail throughput, removal of export duty and China’s demand recovery are triggers. reiterate Buy with Rs 3,100 price target,” Jefferies said in the March 16 note.
Jefferies in its base case expects 24 per cent Ebitda CAGR in Jio over FY22-25E, helped by 47. Crore subscribers at Rs 206 average revenue per user (ARPU), 35 per cent Ebitda CAGR in retail segment over FY22-25E, 11 per cent Ebitda CAGR in refining over FY22-25E and 4 per cent Ebitda CAGR in petchem over FY22-25E.
“We note $120 billion of equity and net debt-equity near 22-year low makes the current capex cycle different from the one in the last decade. We see limited downside to earnings, with tariff hikes pushed out, and see little value being ascribed to new businesses at CMP,” it said.
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