Reliance Industries’ capex benefits to flow in FY25, risk-reward attractive: JPMorgan

The full benefits of Reliance Industries’ $45 billion (Rs 3.6 lakh crore) of investment and capex across businesses over FY22-24 will start flowing through from FY25 earnings, believes global financial services firm JPMorgan.

It remains Overweight on the stock and continues to see the stock price offering attractive risk-reward. Its target on RIL is Rs 2,960, indicating a 19 percent upside from the current levels.

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“Overall, we expect this year’s AGM (likely in June/July) to give more color on Jio Financial Services (JFS) and Retail,” JPMorgan analysts Pinakin Parekh and Sarfraz Bhimani said in a recent report.

End game for Retail?

RIL has aggressively added floor space, nearly doubling in last two years to ~65 million square feet. The conglomerate has also added warehousing space, acquired multiple brands across categories and entered new categories and formats.

While there are investor questions on when these initiatives will help in margin expansion, JPMorgan’s analysts believe the full benefit will flow through to earnings and bottom line over next 2-3 years.

Refining margins to rebound

Singapore benchmark refining margins have collapsed with spot GRMs at $2.2 per barrel versus Q4 average of $7.6per barrel. But demand indicators continue to be resilient, especially uptick in mobility fuels, and that will help GRMs rebound, according to Parekh.

“Petrochem spreads are also averaging higher vs. 2HFY23 and, overall, a combination of arbitrage barrels, and elevated naphtha-ethane spreads should result in steady O2C earnings,” he said.

“We remain Overweight on RIL and continue to see the stock price offering attractive risk-reward with multiple growth optionalities not reflected in the stock price,” he concluded.

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