Despite the excitement from retail investors about Reliance Industries’ (RIL) recent bonus share announcement, the company’s annual general meeting (AGM) did not provide any strong reasons for brokerages to raise their target prices for the stock.
The listing of RIL’s consumer-focused businesses—Reliance Jio and Reliance Retail—could lead to a reevaluation of India’s most valuable stock, but Mukesh Ambani, RIL’s chairman, did not mention this in his AGM speech.
RIL shares closed 1.5% higher on Thursday, driven by the buzz around the upcoming bonus share announcement on September 5. However, on Friday, the stock dropped by 0.5%. Major brokerages did not increase their target prices for the stock but maintained their “buy” ratings. Macquarie kept a neutral stance, pointing out that the lack of progress on the spinoffs for Jio and Retail could disappoint investors.
RIL expects both Jio and Retail to double their revenue and EBITDA in the next 3-4 years. Additionally, they aim for their new energy business to be as significant and profitable as their oil-to-chemicals (O2C) business in 5-7 years. These targets were in line with what analysts had already expected.
Analysts see potential growth from RIL’s new energy projects over the next 3-5 years, but they caution that these plans need to be carefully managed.
Kotak Institutional Equities maintained an “ADD” rating for RIL with a fair value of Rs 3,200, noting that there are no immediate growth drivers in place.
ICICI Securities also held a “hold” rating, highlighting expected strong earnings growth (a compound annual growth rate, or CAGR, of 14.2% over FY25–27) and the upcoming 1:1 bonus issue, but remaining cautious due to high valuations and low free cash flow yields.
Nomura considers RIL the best pick in the energy sector with a target price of Rs 3,600, expecting strong growth across all business segments and a significant increase in free cash flow to Rs 800 billion by FY27.
JM Financial kept its 12-month target price at Rs 3,500 but set a 3-year target of Rs 4,600, stating that concerns about RIL’s debt are overblown since the company’s capital expenditure and net debt peaked in FY24. They believe RIL can still achieve a strong 16-17% earnings growth rate over the next 3-5 years, with Jio’s average revenue per user (ARPU) expected to grow at about 11% annually from FY24 to FY28.
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