Brokerage firm UBS has increased its price target on Reliance Industries Ltd., the Nifty 50 heavyweight and Mukesh Ambani-owned oil-to-telecom-to-retail conglomerate to ₹3,400 per share from ₹3,000 earlier. The brokerage has also maintained its “buy” recommendation on the stock.
UBS believes that Reliance Industries’ downward earnings revision trajectory could be coming to an end after being revised downward by 19% and 27% over the last two years, primarily driven by the performance of the consumer businesses falling short of street expectations.
However, the earnings visibility for the consumer business appears to be improving and the earnings revision trajectory can reverse due to an increased possibility of tariff hikes for Jio, along with strong subscriber addition and sustained momentum in retail revenue and margin expansion.
UBS expects Reliance’s consumer business to contribute to around 85% of the company’s incremental Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) over financial year 2024 – 2026.
The brokerage has also increased revenue and EBITDA estimates for the core retail business by 1% and 4% and 1% and 6% respectively over financial year 2024 – 2026 due to a gradual improvement in discretionary spend, favourable raw material prices and a focus on driving premium products in grocery stores.
“Reliance Retail is well placed to tap India’s long-term retail opportunity given its retail expansion, differentiated product portfolio, and launch of consumer centric formats,” UBS wrote in its note.
UBS is also expecting Reliance Industries to reduce its debt by nearly $10 billion over the next two years as better earnings could generate enough cash to fund capex.
Out of the 34 analysts that have coverage on Reliance Industries, 28 of them have a “buy” recommendation, four of them say “hold,” while two have a “sell” rating on the stock.
Shares of Reliance Industries have corrected 14% from their recent record high of ₹3,400. The stock is up 27% over a 12-month period.
