Reliance gains on ‘overweight’ tag from JP Morgan with 17% upside

Analysts at JPMorgan turned bullish on the telecom-to-oil conglomerate, saying that most of earnings cut for RIL were now behind

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Shares of Reliance Industries (RIL) gained 0.5 percent to Rs 2,406 on November 29 after global brokerage firm JPMorgan shared an ‘overweight’ rating on the counter with a target price of Rs 2,810 apiece, implying an upside of 17 percent from the current levels. The S&P BSE Sensex was up 270 points or 0.4 percent at 66,444 as of 9:20am.

Analysts at JPMorgan turned bullish on the telecom-to-oil conglomerate, saying that most of earnings cut for RIL were now behind.

“The recent stock correction corresponds to the 21 percent cuts to FY24 earnings per share (EPS) forecasts since June 2022. We believe that the conglomerate is turning free cash flows positive now,” the brokerage firm said.

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Analysts believe that the telecom and retail verticals of RIL will help drive growth in the 12-month forward number from hereon and revive investors sentiment.

So far this year, the stock of this index heavyweight has declined 6 percent as against an 8 percent rise in the benchmark Sensex.

In the September-ended quarter for fiscal year 2023-24 (Q2FY24), RIL’s consolidated profit jumped 27 percent year-on-year (YoY), whereas revenue from operations rose 1.3 percent mainly constrained by a fall in the O2C business revenue.

While the retail earnings before interest, tax, depreciation, and amortisation (Ebitda) grew 32 percent YoY, O2C Ebitda climbed sharply by 63 percent YoY led by strong petrol and PVC margins.

Also read: Will Trent’s super success with value retailing get dented by Reliance Retail and Shoppers Stop?

Analysts at Prabhudas Lilladher maintained a ‘buy’ rating after the results, with a target price of Rs 2,618 apiece, valuing the standalone business at 7.5 times (x) FY26 EV/Ebitda, Jio at 15x FY26 EV/Ebitda and retail at 37x FY26 EV/Ebitda.

Those at JM Financial, too, reiterated the ‘buy’ call on RIL as they believe that net debt concerns were overdone and the conglomerate has industry leading capabilities across business to drive strong 14-15 percent EPS CAGR over the next 3-5 years.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

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