The stock price of the country’s richest man Mukesh Ambani Reliance Industries (RIL) continues to fall and has lost more than 6 percent since last Monday. Reliance, the country’s largest private company by market capital, had announced a capital expenditure of Rs 75,000 crore in the new energy business at the AGM a few days ago, but it failed to attract investors. Global brokerage firm Macquarie Group has rated it ‘underperform’ due to the fall in the stock markets and has kept its target price at Rs 1350 per share for 12 months. This is 35 percent less than the current market price of the company. Reliance’s shares have risen 5.8 per cent so far this year while Nifty50 has gained 13 per cent.
Reliance AGM: Reliance Retail will give 10 lakh jobs in 3 years, Mukesh Ambani announced in the annual meeting
Assessment from Annual General Meeting (AGM)
Jio/Digital Services: According to Macri’s analysts, Reliance had announced the launch of JioPhone Next as expected. Analysts believe that Jio will focus on increasing the number of subscribers rather than ARPU / customer quality and it can have up to 500 million users by FY 2023. Which is 10 percent less than the present Rs 138 per month.
Retail: Indian retail market is growing rapidly. In such a situation, analysts at Macarin estimate that the net revenue of Reliance Retail can increase from $ 1100 million to $ 1800 million by FY 2023, $ 2,500 crore by FY 2025 and up to $ 500 million by FY 2030. Apart from this, EBITDA will also increase three times in the next five years. According to Macaire, the company’s revenue from the retail sector can increase by up to 27 percent after the completion of the Future Retail deal.
Oil to Chemical (O2C): According to Mukesh Ambani, the process of a deal with Saudi Aramco is in progress, but according to Macair, when the market was growing rapidly, the valuation of the stake sale was fixed at $ 7500 million at that time but now it may decline after 2019 .
Concerns about cash: Reliance Industries has not been able to maintain its free cash flow generation for the last 15 years. According to the estimates of the brokerage firm, Reliance’s free cash flow may remain negative even further as Reliance Industries is planning to spend a huge amount of Rs 75,000 crore as capital expenditure.
Dodla Dairy 28% and Kims listed at over 22% premium, got a strong start on the stock exchange
Outlook – ‘Underperform’ rating since May 2020
Talking about Reliance Industries’ near term outlook, it is positive and will be supported by improvement in refining and chemical sector margins. However, the brokerage firm has kept the recovery forecast for Reliance’s refining and chemical margins low and it could be 25 per cent lower than the earnings estimates. Apart from this, the firm has also expressed concern about the estimate of slow growth in ARPU hike. This brokerage firm has rated Reliance underperform since May 2020 last year.
(Article: Kshitij Bhargava)
(The stock recommendations given in the story are those of the respective research analyst and brokerage firm and Financial Express Online does not take any responsibility for this investment advice. Investing in capital markets is subject to risks and please consult your advisor before investing. )