Investment Tips : Global brokerage and research firm UBS has upgraded its recommendation on Reliance Industries. The brokerage firm has changed its opinion on this stock from ‘Neutral’ to ‘Buy’. UBS analysts report said that after slowdown on the macroeconomic front and due to energy cyclicality, Reliance Industries is now entering the growth phase of its three segments – Energy, Consumer Retail and Jio. Reliance Industries shares are falling even before the first quarter results are out and have fallen 2.8 percent to 2,050 so far. This stock has been performing below the Nifty-50 benchmark. This has been the case so far this year.
UBS believes that due to the increasing demand for energy, including oil, gas, its growing presence on e-retail and digital platforms, the opening of new stores and the launch of JioPhone, due to competitive tariffs compared to other mobile network companies, Reliance There will be a lot of momentum in the business of industries.
UBS has kept the base target price for Reliance shares at Rs 2500. The target price has been kept at Rs 3150 in the bullish market and Rs 1800 in the bear market.
Oil to Chemical (O2C) business will improve
UBS believes that during FY 2021 to 2024, Reliance’s Oil to Chemical (O2C) earnings will increase as its regional refining margin shows full potential for recovery. Profits in petrochemical business will also be supported. The current valuation of the oil to chemical (O2C) business is less likely to decline as its fundamentals appear to be improving. Also a major stake is to be sold to Saudi Aramco. This will give new energy to Reliance’s $10 billion investment.
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Growth is also visible in Jio
UBS believes that the next launch of Jio phones, a strong presence in the spectrum as compared to its competitors, attractive tariff plans for customers, will give growth to Jio. The firm says that Jio’s earnings per customer i.e. ARPU will also increase by eight to ten percent between 2022 and 2025. The launch of 5G smartphone (Jio 5G Smartphone) from Jio for $ 50 i.e. Rs 3750 can prove to be a game changer.
Retail business revenue will triple?
Reliance Retail’s earnings have taken a hit due to the lack of integration with Future Retail, but UBS says its revenue may triple in the next three to five years. The way Reliance Retail is showing a boom in digital and omnichannel platforms with the opening of new stores, the growth potential of its e-commerce has increased significantly.
(Article: Kshitij Bhargava)
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