Synopsis: 'Reliance Industries' shares rose about 1% ahead of the much-anticipated AGM scheduled for August 29. Brokerages have increased target prices, anticipating major announcements, particularly around the telecom and retail sectors.
Shares of Reliance Industries Ltd (RIL) experienced a slight uptick on Friday, rising approximately 1% to Rs. 3,022.65, with the company’s market capitalization nearing the Rs. 20.5 lakh crore mark.
As the largest listed company in India, RIL was among the top gainers in the benchmark indices, providing robust support to the market.
Key Factors Driving Stock Performance:
The focus is on the upcoming annual general meeting (AGM) of RIL, slated for Thursday, August 29, where market participants are eagerly awaiting potential announcements.
Expectations are high for possible demerger plans or separate listings of the telecom and retail businesses, which have spurred interest among investors and analysts alike.
Brokerage firms, both domestic and global, maintain a positive outlook on RIL's stock.
Bernstein, a notable brokerage, has raised its target price for RIL, citing the growth momentum driven by Reliance Jio.
The brokerage attributes this optimism to higher valuations following recent tariff hikes by Jio, which surpassed previous expectations, along with the completion of its 5G rollout.
Bernstein projects a 16% compound annual growth rate (CAGR) in revenue and a 20% CAGR in EBITDA for Jio over the next three years, expecting the benefits of the tariff hike to reflect in the financial year 2025.
Bernstein also highlights that RIL's retail arm is focusing on operational efficiency, with moderated capital expenditure and rationalized store operations.
The oil-to-chemicals (O2C) segment’s earnings remain steady despite petrochemical margin weakness due to increased capacity and muted demand.
However, refining margins continue to be robust, driven by steady global oil demand growth.
Bernstein has revised its target price for RIL to Rs. 3,440 from Rs. 3,190.
Analyst Expectations and Future Outlook:
CLSA, another leading brokerage, also maintains an 'Outperform' rating on RIL, with a price target of Rs. 3,300 per share.
The firm expects the next phase of growth to come from 5G monetization and the expansion of broadband services.
Analysts are also focusing on RIL’s new energy business, debt status, and capital expenditure plans, which are anticipated to be key topics at the upcoming AGM.
RIL's annual report for FY24 highlights its commitment to monitoring financial markets to seize suitable capital-raising opportunities, supporting its growth strategies.
The company’s new energy business roadmap shows rapid progress in establishing 5 Giga factories, aiming to achieve Net Carbon Zero by 2035.
Furthermore, RIL's digital business strategy emphasizes the advantage of its 5G rollout via standalone architecture and the potential of JioAirFiber to expand the market.
The company reiterated its target of reaching 10 crore users with its JioBharat phone, aiming to make India '2G-mukt'.
JM Financial, maintaining a 'buy' rating with a target price of Rs. 3,500, emphasized RIL’s strong capabilities across its businesses, noting that peak capital expenditure and net debt are likely behind the company.
Financial Performance and Dividend Announcement:
Despite the optimistic outlook, Reliance Industries reported a 5% decline in its consolidated net profit for the first quarter ending June 2024, totalling Rs. 15,138 crore.
This decline came despite a 12% year-on-year increase in revenue from operations, reaching Rs. 2.36 lakh crore. The bottom line, however, fell short of market expectations.
RIL also announced a dividend of 100% or Rs. 10 per share of face value, conditional on approval at the upcoming AGM. The record date for this dividend was set for August 19, 2023.
In conclusion, the recent rise in Reliance Industries' share price reflects strong investor anticipation ahead of the AGM, with expectations for major announcements regarding the company’s telecom and retail businesses.
Brokerages remain optimistic about the stock, driven by positive growth projections in Reliance Jio and the company’s strategic focus on new energy and digital expansion.
However, investors should remain cautious and closely monitor the developments during the AGM for any significant updates that could impact RIL's future trajectory.
Disclaimer: The information provided here is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
