Mumbai
Reliance Industries (RIL), the company of India and Asia’s largest nobleman Mukesh Ambani, recently disappointed investors with their quarterly results. The results were less than expected, due to which the company’s shares declined on Monday. The company’s shares had increased by 25% from the low -lying level of March but after that there was a selling pressure. However, many large brokerage houses are still optimistic about Reliance. He believes that the company has immense development potential which can prove to be very beneficial for the company in the coming months.
The stock market saw a mixed response to the results of RIL. Kotak Equities reduced RIL’s share to ‘Buy’ to ‘add’. At the same time, global brokerage houses like JP Morgan and Jeffers have increased the company’s target price by 8% and 5% respectively. This shows that these brokerage houses have full confidence in RIL’s growth. This is good news for 48 lakh shareholders of the company. Here we are telling about the 3 main reasons that can accelerate RIL shares:
1) Increase in Jio’s ARPU:
Jio has performed brilliantly in the first quarter and has increased to ₹ 208.8 per month. This is 1.3% higher than the previous quarter. According to Bernstein, Jio has also performed well in the case of margin. But even better performance is expected. Jefferies analysts estimate that Jio’s ARPU can reach ₹ 273 from 11% CAGR (compound annual growth rate) during FY25-28. He believes that Jio will increase tariffs by 10% thrice, which will increase the ARPU.
Apart from this, an increase in the number of home broadband users will also help to increase the ARPU. Jio has added 498.1 million new subscribers, which is a 1.7% increase in quarterly. The company’s EBITDA margin has reached 51.8%, which is an increase of 170bps, a quarter-by-quarter. Jio’s consolidated revenue was ₹ 410.5 billion, which is an increase of 18.8% year-on-year.
Reliance got strong profits in the result, but why did shares fall 3% in BSE?
2) New Energy Business:
RIL is moving rapidly in new energy business. The company aims to complete giga factories and new energy projects (polysilicons, wafers, cells, modules, batteries) in the next four to six quarters. According to Bernstein, Reliance’s Giga Complex will be 4 times larger than Tesla’s Giga factory. The company plans to turn on the capacity of solar cells by March next year. The company’s 7,000 -acre site at Kutch has a capacity to generate 125GW power.
Nuwama’s analysis shows that RIL has a lot of value in new energy business. If RIL’s module business (20GW capacity) is given 15X EV/Ebitda, its EV will be $ 20 billion. This may speed up the stock price of RIL, as it was seen in 2017 after the launch of Jio. Nuwama believes that the new energy business can contribute more than 50% to RIL’s PAT. Apart from this, it can also increase the valuation of O2C business, as the company aims to achieve net zero-carbon emissions by 2035.
JP Morgan says that the business model of Reliance Industries is changing. Earlier the company earned either from new refining/chemical capacity or margin bicycle. But now Reliance Retail and Telecom contributes about 54% to the company’s consolidated Ebitda.
Brokerage firms looted and looted this company on this company of Mukesh Ambani
3) Jio IPO:
Jio’s IPO has long been awaited. Although it has been postponed to 2025, it is a major opportunity for Reliance Industries to unlock the shareholder value. JP Morgan estimates that the valuation of Reliance Retail is $ 121 billion, trading at ~ 32X of FY27e Ebitda. This is much lower than 42x multiple of DMART. JP Morgan analysts say that Reliance Retail’s valuation can further accelerate Reliance’s stock through IPO or through steak cells.
The CLSA is confident that Reliance’s consolidated Eibitda will be much better in the coming time due to the increasing stock of Jio and retail. The CLSA believes that RIL’s valuation is still low, so it is a good option for investment in the Indian market. JP Morgan says that the valuation of RIL is still appropriate, while most of the stocks in the market are trading above the historical valuation. It is expected that RIL will give positive free cash flow and its Ebitda will be around $ 20 billion per year.
Good days are coming
Nomura also believes that RIL shares will accelerate. Nomura says that RIL’s stock is currently trading on 12.1x and 23.3x FY27F EV/Ebitda and P/E. Nomura has repeated the ‘buy’ rating for RIL. Investors will now be seen on the AGM of the upcoming company. They are expecting development plans, expansion of new energy facilities, expansion of new energy facilities, speed in retail, subscriber edition of Jio, subscriber editions and monetization and Jio’s IPO.
RIL’s goal is to double their live and retail business and bring the new energy business to the size of their O2C business. The company aims to double the size of Reliance by the end of FY30. The brokerage house believes that this goal can now be achieved. The better time is coming for 48 lakh RIL shareholders.
