Domestic brokerage Kotak Institutional Equities believes that Reliance Industries (RIL) is a compelling buy after falling nearly 20% from its high of 2,856.15 per share.
“We at CMP believe that the market is not paying any price for RIL’s monopoly advantage in New Commerce/FMCG forays, New Energy, or R-Geo after the recent reform [RIL -20 percent, Nifty -10 percent].” Compared to our base case valuation of 32.5 times, this seems to account for a much lower retail multiple (25 times EV/EBITDA). 500 billion more in net debt, according to the note.
The price of RIL shares was up by 1.84 percent. 2,243.90 in Monday’s trading on the National Stock Exchange. However, the stock has reached a 52-week low and has lost more than 12% so far this year. 2,180 in 2023 on March 20.
Kotak Equities stated that the Mukesh Ambani-led RIL’s recent poor performance surprised them given the optimistic outlook across key verticals. The broker reiterates its “buy” recommendation for the stock, which has a low fair value of 2,9003,000.
The brokerage has reduced its 2024–25 EBITDA by 4-5 percent, primarily as a result of the perception that Reliance Jio will delay raising its tariffs.
According to the note, “We modify our FV 2,900 (from 3,000) largely due to R-Jio valuation cut and higher net debt assumption.”
As the 5G rollout is completed this year, Kotak anticipates that capex will decrease from the current high levels but will remain stable. 1.0-1.1 lakh crore, driven by retail expansion and new investments in energy.
The brokerage said that higher margins, lower export taxes in refining, rising volumes, higher prices in E&P, and a recovery in petchem spreads are likely to keep the energy segment’s earnings strong.
In the telecom upward, the business expects rising cutthroat force and defer in levy climb till 2024 decisions. However, according to the brokerage, this would effectively establish a monopoly and reduce Reliance Jio’s market share.
The brokerage believes that RIL will have market leadership across multiple verticals in the retail industry due to recent acquisitions, store expansion, and entry into new verticals.
disclaimer: 02 help does not endorse the opinions or recommendations presented above; rather, they are those of individual analysts or brokerage firms. Before making any investment decisions, we recommend that investors conduct due diligence with licensed professionals.