RIL Shares Hit Record High. What's Next?

Reliance Industries Ltd. is set to see debt levels peak in the first half of 2024, even as the much-awaited initial public offerings of its consumer businesses are expected to launch in the next 12-18 months, according to CLSA.

Based on the organic and inorganic triggers working in favour of the company, the brokerage has reiterated its 'buy' rating for the oil-to-telecom conglomerate, with the target price at Rs 2,580.6 per share.

The stock is within 10% of the agency's deal-based conservative value, CLSA said in a note on Wednesday.

On the telecom front, Reliance Jio Infocomm Ltd. completed its pan-India 5G rollout last year. This marks an end to rising capex and net debt.

A likely pick-up in wireless broadband subscribers may surprise investors who are unsure on the monetisation of 5G. The telecom arm may also benefit in 2024 from potential tariff hikes, higher usage and ARPU, and a pick-up in industry consolidation, according to the brokerage.

Rise in the high-ARPU AirFiber subscriber base would be a notable positive for the stock. Potential tariff hikes after the elections could boost telecom stocks on the whole.

As Reliance Retail Ltd. stocks stabilise, the unit can see profitability rise in 2024. Unit profitability from the September quarter should pave the way for retail Ebitda to more than double in three years, it said.

"With five years drawing to a close from the first private equity investment, we see the chance of a Jio and/or retail IPOs within 12-18 months, which could be a key trigger," it said. "This combination of organic and inorganic triggers leads us to reiterate our buy call."

• 'Overweight', with a target price of Rs 2,810 per share.

• Slightly weaker December quarter performance, but in line with full-year forecast.

• RIL to report 5% sequential decline in earnings in the third quarter, on lower oil-to-chemical and refining margin.

• Growth in telecom and retail business to help achieve a profit after tax of Rs 19,700 crore.

• Recovery in commodity margin, telecom tariff hike, possible listing of Reliance Jio or Reliance Retail to be potential catalysts.

• Positive free cash flow for the next three years.

• Retains 'buy' on RIL.

• The company has exposure to structurally growing consumer and tech businesses.

• Compounding with a robust O2C business is benefiting from tight refining cycle.

• Chemical business is more resilient from industry downturn due to cost curve advantages.

• Maintains 'buy' rating, with a price target of Rs 3,125 per share.

• The next fiscal to see 13% Ebitda growth, with Jio contributing a two-third share on the back of a tariff hike.

• Capex in Jio and Retail expected to decline in the next fiscal, helping improve free cash flow and addressing concerns on rise in net debt.

• Ebitda estimates for the current and the next fiscal lowered to 2% and 1%, respectively, on lower O2C profit.

• 'Overweight' rating, with a price target of Rs 2,821 per share.

• Energy and new energy should be key for earnings and net asset value inflection.

• RIL to have an eventful 2024, with investments in the past two years moving into the monetisation phase.

• Revenue from the new energy vertical to look out for.

• A turn in the chemical cycle, a golden age for refining, traction in 5G subscribers and a slowdown in investments in retail can pique investor interest.

Shares of RIL rose as much as 2.83% during the day to a record high of Rs 2,724.95 apiece on the BSE. It was trading 2.61% higher at Rs 2,719 per share, as compared with a 0.07% advance in the benchmark Sensex at 3:01 p.m.

The company's stock has gained 18.18% in the last 12 months. The total traded volume so far in the day stood at 1.8 times its 30-day average. The relative strength index was at 76, implying that the stock may be overbought.

Out of 35 analysts tracking the company, 31 have a 'buy' rating on the stock, two recommend 'hold' and as many suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 4.6%.