In a recent development, Jefferies India, a prominent brokerage firm, has given a vote of confidence to Reliance Industries Ltd (RIL) stock, following a 7.5 percent dip from its record high. While they acknowledge the strength of global refining margins, they have cautioned that this trend may not be sustainable in the long run.
Jefferies has not only maintained a ‘buy’ rating on Reliance stock but has also raised the target price to Rs 2,950 per share, indicating a substantial 22 percent increase from the current market price.
One key aspect highlighted in the report is the resilience offered by robust refining margins, which serves as a buffer against potential downside risks for Reliance’s oil-to-chemical business EBITDA.
The brokerage firm also emphasized the impact of the reintroduction of export duty on refined products, which is expected to limit margin growth to approximately 25 percent of Reliance’s refining output. Furthermore, Jefferies anticipates reduced capital expenditure for Reliance Jio and Reliance Retail by FY25, paving the way for robust free cash flow generation.
On a more optimistic note, Jefferies envisions an upside scenario where the target price could reach Rs 3,300 per share, signifying a remarkable 37 percent increase from the current valuation. This bullish outlook is based on several factors, including the potential tariff hikes by Jio, the prospect of its listing, which could enhance valuations, expanded market share gains by Reliance Retail at an accelerated pace, and the anticipation of Jiomart’s GMV surpassing expectations, particularly with the festive season on the horizon.
In summary, Jefferies India’s assessment of Reliance Industries Ltd’s stock paints a positive picture, with a favorable valuation outlook and potential for significant growth in the coming years. Investors are urged to keep a close eye on developments in the refining industry and the performance of Reliance’s key businesses for further insights into the company’s stock performance.