Reliance Industries share price: What brokerages are saying about RIL’s future prospects post its AGM

MUMBAI: Brokerages have a mixed view on Reliance Industries after its annual general meeting in which the company announced its new energy business foray and affordable smartphone launch plan among other announcements. There was no timeline provided for initial public offerings of Reliance Jio and retail business, the brokerages said. Brokerages also said expectation around Saudi Aramco deal were only partially met and highlighted concern over falling petrochemical business margins. ET takes a look at what brokerages are saying about the company’s future prospects:

Morgan Stanley

• Maintained overweight rating with a target price of Rs 2262
• The shift in capital allocation to renewables/decarbonisation should lift multiples
• The company’s partnership approach in new energy business should not cause a de-rating.
• Strategic partnership with Saudi Aramco for oil to chemicals vertical should help get synergies even in new energy initiatives

Kotak Institutional Equities

• Maintained add rating with a target price of Rs 2,200
• The brokerage likes Reliance’s long term transition roadmap but sees limited upside to valuation and estimates in the near term
• Reliance’s for way into new energy business could benefit from policy initiatives to encourage domestic manufacturing of solar energy equipment
• Saudi Aramco partnership will enable Reliance to shift capital allocation from legacy oil to chemicals business to new energy and materials segment

UBS

• Maintained neutral rating with a target price of Rs 2150
• The twin execution plan of building a new energy and new materials ecosystem and decarbonising or repurposing the existing oil to chemicals business is the next growth driver for Reliance Industries
• The green businesses would repurpose Reliance Industries’ existing assets to transform the legacy business into a sustainable, circular and net zero carbon materials business
• Synergies from partnerships are gradually materialising

CLSA

• Maintained outperform rating with a target price of Rs 2250
• Clarity on the new energy foray is useful but any big take-up of new smartphones and progress in omni-channel retail will be more important triggers
• Main risks include delays in commissioning the downstream expansion or a slower-than-expected pace of subscriber additions for telecom business
• The company exhibited hopes of closing the O2C stake sale with Aramco this year

JP Morgan

• Maintained neutral rating and target price revised to Rs 2250 from Rs 2055
• Would not be surprised to see some of the outperformance reverse after the run-up in stock price over the last six weeks
• Focus will shift back to earnings from news flow
• There was no timeline provided on WhatsApp-Jiomart and no timeline on initial public offerings of Jio/Retail business

Jefferies

• Maintained buy with a target price of Rs 2540
• The renewables transition plan sounded ambitious with little details but should improve the company’s environment, social and governance or ESG score
• The keenness of Jio on 5G services May lead to a 5G capex cycle and hit free cash flows but may consolidate the market
• Omni channel growth will be the key focus in retail

Goldman Sachs

• Maintained buy rating with a target price of Rs 2425
• The next leg of growth at Reliance Industries will likely not result in an increase in leverage
• Continue to see favourable risk-reward with 44% upside in bull case and 11% downside in bear case
• The brokerage sees improved subscriber traction for Jio on the back of the smartphone launch assuming there is competitive pricing

HSBC

• Maintained hold rating with a target price of Rs 2070
• The AGM revealed a vision for Reliance’s new energy business on a gigascale, aiming to achieve a perfect green score
• Ongoing expectations for new Jio phone and Saudi Aramco deal were only partially met
• Maintain rating as petrochemical business margins have started falling and the rest are yet to pick up

Edelweiss

• Maintained hold rating with a target price of Rs 2105
• Shift towards new energy is a significant ESG positive
• The market may have reservations in the near term on the start of a new, large long-gestation venture capital like investment subduing already low return on equity in the near term
• The company’s FAANG- like valuation is misplaced as oil to chemicals and telecom make up around 70% kg the value