 "RIL share to stay sideways amid no 'big bang' AGM announcements: Analysts")
Reliance share price: At ithe Reliace Industries' 47th Annual General Meeting (AGM), RIL laid out vast plans towards its transformation into a deep-tech company with advanced manufacturing capabilities. Yet, analysts maintained their 'cautiously optimistic' stance on the company as they believe the current stock price reflects most of the positives.
On the bourses, Reliance Industries share price dipped 1.1 per cent to an intraday low of Rs 3,007 per share. It, eventually, ended 0.7 per cent lower at Rs 3,019.75 per share as against the BSE Sensex's 0.28-per cent gain on Friday.
According to analysts the AGM lacked any "big bang" announcements as growth potential from the 'New Energy' vertical needs capex beyond the currently announced Rs 75,000 crore, while continued expansion of 'Reliance Retail' and 'Jio' infrastructure meant that the free cash flow (FCF) yield improvement may remain back ended.
"We like Reliance's business and balance sheet, and believe all three of its core businesses – oil to chemical (O2C), retail, and digital services – have become self-sustaining and cash-generating," said analysts at HSBC.
O2C, however, will likely remain lacklustre given weak macro and new capacity commissioning; the Retail business still lacks macroeconomic support; and new energy ramp up could be gradual as technologies take time to mature.
"This will likely keep the stock range bound in the near term," the brokerage said with a 'Hold' rating and a target price of Rs 2,780.
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RIL's AGM growth blueprint
During the 47th AGM on Thursday, Chairman Mukesh Ambani said Reliance Industries aims to double the company's current size by FY28.
Segment-wise, Reliance Jio will build large-scale AI infrastructure, coupled with the development of Jio Brain, a suite of tools and platforms that span the entire-AI lifecycle. The management aims to double Jio revenue and Ebitda in the next three-to-four years.
On the retail side, Reliance Retail aims to use deep technology with real-time dashboards and AI native capabilities to strengthen operations, and build capacities in data analytics for personalisation for best-in-class customer experience.
Here, too, the management eyes doubling of Reliance Retail's revenue and Ebitda, over the next three-to-four years, to Rs 4.2 trillion and Rs 44,500 crore, respectively.
In the new-energy segment, Reliance Industries reiterated its commitment of Rs 75,000 crore, first announced in 2021. RIL said it expects the segment's prospective profitability equalling current O2C profitability in the next five–seven years, with an Ebitda run-rate of Rs 60,000-65,000 crore during the period.
Lastly, in the O2C segment, RIL is set to enhance its vinyl value chain with the addition of 1.5 million tonnes of PVC and CPVC at Dahej and Nagothane by 2026-27, and expand specialty polyester capacity by 1 million tonne by 2026-27, with a planned integration backwards to a 3 million tonne PTA capacity by 2027. O2C is RIL's largest profit base currently, contributing towards two-fifth of Ebitda and more than half of attributable net profit.
"We are optimistic on earnings outlook and estimate around 13 per cent earnings CAGR over FY24-27. However, with telecom tariff hike already taken, and retail/O2C businesses currently subdued, there are no near-term catalysts," said those at Kotak Institutional Equities with an 'Add' rating and an unchanged target price of Rs 3,200.
Jio, Retail biz listing missing
Analysts believe any announcements on the potential value unlocking through separate listing of R-Jio and/or Retail business will be the next key trigger for the stock's rerating.
"We are now ascribing a rich valuation to JIO and Retail seeing their huge potential, while remaining positive on the core O2C business (both refining and chemicals). RIL is almost done with its capex cycle, and investing in world-scale projects, which are expected to drive future growth in months to come. RIL's foray into the new energy business shall unleash the next leg of growth," said Nuvama Institutional Equities with a target price of Rs 3,786 and a 'Buy' rating.