As per an ET report by Nikhil Agarwal, the boost in target prices was influenced by positive remarks from RIL’s management regarding moderation of capital expenditures (capex) and the possibility of increased telecom tariffs.The question now is: Is it time to buy RIL shares?
RIL stock performance
RIL’s stock has seen a 14% increase this calendar year, but was trading flat on Tuesday morning after the earnings release. However, brokerages are showing optimism, with several increasing their target prices to up to Rs 3,500.
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RIL: Brokerage insights
The global brokerage firm Jefferies has raised its target price for Reliance Industries (RIL) from Rs 3,140 to Rs 3,380, expecting a 14% EBITDA growth in FY25, largely driven by Jio’s expected tariff hike.
UBS has set a target price of Rs 3,420 for RIL, suggesting that retail business sales will grow in the near term due to increased sales per square foot from new stores opened in the last two years.
Macquarie has kept a neutral outlook on RIL but has raised its target price from Rs 2,560 to Rs 2,630. Morgan Stanley, meanwhile, has maintained a positive outlook with a target price of Rs 3,046.
Bank of America (BoFA) has a target price of Rs 3,250, while Bernstein’s target price is Rs 3,160.
High expectations for RIL
Domestic brokerage Nuvama has set the highest target price for Reliance Industries (RIL) at Rs 3,500. They believe that RIL’s new energy projects will drive the company’s next phase of growth while supporting its traditional businesses. Reliance Retail‘s year-on-year growth was only 11%, the slowest in three years, mainly due to store restructuring and a higher baseline.
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According to Equirus Securities, the ongoing decline in discretionary spending worsened the situation. However, Reliance Industries maintained a solid operating margin of 7.4% in the recent quarter. Although they expect this weakness to continue in the near term, Reliance Retail has significant potential in the Indian market. Equirus predicts that the company will achieve a compound annual growth rate (CAGR) of 13% in revenue and 16% in EBITDA between FY24 and FY27.
Concerns on debt and capex
Analysts believe that worries about Reliance Industries’ debt are exaggerated, as they expect the company’s net debt to decrease gradually. This is because capital expenditures (capex) are set to moderate, and the funding for capex will come from an increase in internal cash generation.