RIL shares rise after two sessions as Jefferies says current price reflects little value to business
Shares of Reliance Industries Ltd (RIL) rose after two days of losses today as financial brokerage Jefferies assigned a buy rating to the conglomerate. It reiterated its price target of Rs 3,100 a base case scenario, citing adequately funded balance sheet, low leverage and strong OCF positions. The stock had lost 15% in the last 2.5 months considering its previous close of Rs 2322.75.It closed at Rs 2732 on November 30 last year.
Jefferies is of the view that the recent fall in share price of Reliance Industries makes it attractive. In January this year, the global brokerage firm had said it saw potential earnings upside from RIL’s O2C, putting the target at Rs 3,100.
Buoyed by Jefferies positive stance, RIL shares touched an intraday high of Rs 2381 against the previous close of Rs 2322.75
However, RIL stock has gained 1.54 per cent in one year and lost 6.8 per cent since the beginning of this year. Total 1.12 lakh shares of the firm changed hands amounting to a turnover of Rs 26.54 crore on BSE today. Market cap of the conglomerate stood at Rs 16.08 lakh crore. The share hit an all-time high of Rs 2,855 on April 29, 2022 and a 52-week low of Rs 2,181 on March 8, 2022.
In terms of technicals, the relative strength index (RSI) of RIL stands at 34, signaling it’s neither trading in oversold nor overbought territory.
Reliance Industries stock has a one-year beta of 1.1, indicating high volatility during the period. RIL shares are trading higher than the 5 day moving averages but lower than 20 day, 50 day, 100 day and 200 day moving averages.
“RIL stock has corrected 14% since Dec and trades at 18x fwd PE-a discount to its Long term average. This is attractive in view of 18% earnings growth in FY24E. The current stock price imputes zero value to RIL’s renewable business in our view. We expect investors to ascribe meaningful value to renewables when the first revenues are realized in CY24. Reiterate Buy with a price target of Rs 3,100,” said Jefferies in a recent report.
For the base case scenario, the brokerage has estimated a 24% EBITDA CAGR in Jio over FY22-25E, helped by about 473m subscribers at Rs 206 ARPU; 35% EBITDA CAGR in Retail over FY22-25E; 11% EBITDA CAGR in refining over FY22-25E; 4% EBITDA CAGR in petchem over FY22-25E.
Jefferies has pegged the value of RIL’s renewable business at $28 billion and noted that the current market price of the stock at Rs 2,320.60, as on close of February 13, implied “little value to the business”.
“RIL’s O2C business (refining and petchem) generates on an average US$8bn of annual EBITDA. It could use the majority of this cash to build its green energy business-a key competitive advantage in our view,” said the report.
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