Buy Reliance Industries Stock, Says Motilal Oswal

Motilal Oswal Institutional Equities has a "buy" call on the stock of Reliance Industries with a price target of Rs 2,430 on the stock. The firm has come-up with valuations of the different businesses and sees potential upside on the share. Take a look at why Motilal Oswal Institutional Equities has a "buy" on the shares ahead of the company's annual general body meeting.

Reliance Jio

According to the firm, Reliance Jio plans to accelerate growth through JioPhone, Enterprise Data, and other digital avenues via the recent spate of launches, coupled with new digital app offerings.

"Thus, we assign an EV/EBITDA multiple of 20 times on FY23 EBITDA, with a target price of Rs 847 per share (for its 66% stake). The higher multiple captures the digital revenue opportunity, potential tariff hikes, and opportunity in the Feature Phone market (not built into our estimates)," Motilal Oswal Institutional Equities has said.

 

Retail business

The firm values Reliance Retail's core business at 35 times FY23E EV/EBITDA and assign 4 times to Connectivity, arriving at target price of 755 - after excluding the recent 10% stake sale.

"Our premium valuation multiples capture the accelerated growth in new store openings, digital commerce, and the new JioMart platform," the brokerage has said.

 

Oil to chemicals business

"Vaccination drives appear to be gaining momentum the world over, with large economies such as the US and India inoculating more than 4m daily. This is expected to soon revive demand for transportation fuels, thus boosting gross refining margins. Since the company has stopped disclosing GRMs separately, we build in EBITDA of USD107/134/mt for FY22/FY23E (vis-à-vis USD73-84/mt reported over 3Q- 4QFY21) - on the back of improvement in refining and petchem margins," Motilal Oswal Institutional Equities has said.

"Using SOTP, we value the Oil to chemicals business at FY23E EV/EBITDA of 7.5x, arriving at a valuation of Rs 764 per share for the standalone business, and add Rs 68 for the E&P assets. We ascribe an equity valuation of a) Rs 847/share to RJio on FY23E 20x EV/EBITDA and b) Rs 755/share to Reliance Retail on FY23E 35x EV/EBITDA, factoring in the recent stake sale. Reiterate Buy, with target price of Rs 2,430 per share," Motilal Oswal Institutional Equities has said.

The shares of Reliance Industries was last seen trading at Rs 2,257 on the BSE.

 

Disclaimer

The information above is based on the report of Motilal Oswal Institutional Equities. Investing in stocks are risky and investors should do their own research. The author, the brokerage firm or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as markets have run-up significantly. Please consult a professional advisor.