Buy Reliance Industries For A 20% Upside In The Stock, Says Motilal Oswal

Buy Reliance Industries For A 20% Upside, Says Motilal Oswal

“Following Bharti and VIL, RJio finally took 20% tariff hike effective 1st Dec’19. The success of JioPhone, JioFiber, and new digital investments should offer steady growth opportunities. We expect revenue CAGR of 10% and EBITDA growth of 16% over FY21-24E on the back of an 8% subscriber CAGR over FY21-24E,” the brokerage has said.

Upbeat on retail story

Motilal Oswal also remains upbeat on the retail story of Reliance Industries. Reliance Retail’s consistent performance over the last 4-5 years has been stellar and offers huge scope of growth, given its: a) strong growth of over 25% CAGR; b) enhanced digital capabilities in JioMart, Ajio, among others; and c) new businesses/verticals.

“The GoI has already raised the gas price ceiling to USD6.13/mmbtu for 2HFY22. Considering the current high gas price environment, the management believes that the subsequent revision in the ceiling would be even higher. Thus, sustained high production and improved realization would result in better profitability in the segment in the near future,” the brokerage has said.

Valuation of Reliance Industries

According to Motilal Oswal, the Consumer biz – RJio and Reliance Retail are richly valued given their strong growth potential.

“We see price hikes in the Telecom business and revival in the Retail business – led by strong growth potential in JioMart – as key levers for the stock over the next two years. Reliance Industries is trading at 11.9x FY23E EV/EBITDA and 19.2x FY23E P/E. Using SOTP, we value the stock at Rs 2,900 and reiterate Buy,” the brokerage has said.

The shares of Reliance Industries was last seen trading at Rs 2,477 on the NSE.