Buy This Large Cap Bluechip Stock For 24% Potential Upside, Gave 217.62% In 5 Years

Prabhudas Lilladher, a leading brokerage firm, in its recent report on Reliance Industries Ltd. (RIL) has given a buy call to the stock of the company for a target price of Rs 3,165 apiece. The brokerage claims a potential gain of 24% considering the brokerage's estimated target price and the current market price of the stock. RIL at the 45th AGM spelled out aggressive growth plans across segments.

Reliance is a large-cap multibagger stock with a market capitalization of Rs 17,31,790 crore.

Stock Outlook

01 September, Friday, the stock of the company opened at Rs 2,560.40 apiece, currently, it is trading at Rs 2,548.25 apiece, 0.47% down from its previous close.

On NSE, the 52-week low level of the stock is Rs 2,180 and the 52 week high level is Rs 2,856.15 apiece, respectively. On intraday, the stock's low level is Rs 2,548.25 apiece and the high level is Rs 2,575.35 apiece, respectively.

Its ROE is 7.78%. The dividend yield is 0.32% and the face value is Rs 10.

Returns on Investments

It has given a negative return of 2.33% in the past 1 week and 1.07% in the past 1 month, respectively. Whereas, in the past 3 months, the stock has given a negative return of 6.14%. In the past 1 year, the stock surged 11.45%. In the past 3 years, the stock has given a multibagger return of 104.8% and in the past 5 years, the stock has also given a multibagger return of 217.62%, respectively.

Telecom- 5G the next frontier

Post-acquisition of 5G spectrum for Rs880bn, Jio is all set to launch services in metro cities of Delhi, Mumbai, Chennai and Kolkata by Diwali this year besides expand services pan-India by Dec-23.  RIL will spent Rs2trn (incl spectrum cost of Rs880bn) to expand its 5G infrastructure. Armed with super-efficient 700MHz spectrum coupled with 3.5GHz midband spectrum, Jio is all set to launch Standalone 5G thereby providing superior speed and coverage.  Also, superior spectrum holding will help Jio to rapidly expand fibre like broadband through fixed wireless access thereby eliminating fibre needs in inaccessible areas.  Jio also has aggressive plans to launch captive 5G solutions for enterprise. It is already working on various platforms across agriculture, robotics, healthcare blockchain, IOT etc. to capitalize on 5G enterprise opportunities.

 

Oil to chemicals

RIL plans to invest Rs750bn over next five years to expand capacities across new and existing business.  In polyester business, RIL will set up 3MTPA PTA capacity (existing ~5MTPA) along with 1MTPA PET capacity (existing~1.2mtpa) at Dahej to be commissioned by CY26E. Based on spreads of USD200/ton for PTA-PX and USD300/ton for PET, incremental contribution margins can be USD900mn.  RIL also plans to triple vinyl capacity (current capacity ~0.8MTPA) by adding 1.5MTPA capacity in stages by CY26E and incremental contribution margins can be ~USD1bn.  On new materials, RIL plans to set up one of the world's largest carbon fiber plant with capacity of 20,000MTPA based on acrylonitrile feedstock. RIL plans to start acrylonitrile production next year with start of carbon fibre plant in 2025.

New energy- Mega plans on anvil

RIL has aggressive plans for new energy business across photovoltaic panels, energy storage, fuel cells and electrolyser. Along with that RIL has plans for power electronics to link entire green energy value chain. Work on 10GW solar PV cell based on REC technology will commence production by CY24 and will expand to 20GW by CY26.  The world scale battery manufacturing is set to start by CY23 and scale to fully integrated 5GWh annual cell capacity by CY24. Besides RIL has lined up 20GW solar energy capacity by CY25E.

Retail

For CY22, the company opened 2,500 stores to take the total to over 15,000 outlets. Digital commerce platform delivered six lacs orders every day - an increase of 2.5x YoY. RIL plans to grow multiple channels with an aim to reach maximum customers across India. Create a platform to connect millions of small merchants with customers. Establish a technology enabled supply chain to reduce cost. RIL plans to launch FMCG products this year to deliver high quality affordable products.

Outlook

RIL at its 45th AGM reiterated aggressive growth plans across various business verticals. The company highlighted its plans to invest 1) Rs2trn for rapid roll-out of 5G services in prime metro cities by Diwali (i.e. Oct-22) and pan-India by Dec-23 2) Rs750bn for oil-to-chemicals business to expand polyester, poly vinyl capacity and set up carbon fiber business in next five years, 3) Rs750bn for new energy business to set up Photo Voltaic (PV) capacity, battery storage, fuel cell and electrolyser capacity. RIL also has aggressive growth plans across retail sector and is looking forward to launch high quality affordable FMCG products, in the near term.

Buy for a target price of Rs 3,165 apiece

The brokerage said, "We believe RIL's business segments are very well positioned to benefit from segment tailwinds, given its solid leadership position and well integrated business structure. Further, the company is best placed to incubate new businesses and pursue inorganic opportunities with its liquid BS. Maintain 'BUY' at PT of Rs3,165 (unchanged). Our estimates do not factor projects in new energy and oil to chemicals."

Disclaimers

The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.