Shares of Mukesh Ambani-led Reliance Industries Ltd. may see potential upside of as much as 54%, according to brokerage firm Goldman Sachs’ bull case scenario estimates for financial year 2026. Based on the bull case estimate, Goldman Sachs expects the Nifty 50 heavyweight’s share price to reach ₹4,495 by financial year 2026.
On a base case, Goldman Sachs maintained its “buy” recommendation on Reliance Industries and raised its price target on the stock to ₹3,400 from ₹2,925 earlier. The revised price target implies a potential upside of 17% from Tuesday’s closing price.
Goldman Sachs still finds RIL’s risk-reward to be favourable and also factors in value accretion from the Reliance-Disney JV, while raising its price target.
The firm believes that RIL’s consolidated returns are at an inflection point in financial year 2024 and its Cash Return on Cash Invested (CROCI) will expand by nearly 270 basis points to 12% in financial year 2027, which will be the highest since 2011.
Reliance Industries has invested over $125 billion in capex over the last decade, mostly in hydrocarbon and telecom, which are more capex intensive and have a longer gestation period of over five years. However, the new businesses that the company is investing more in the next three years (Retail and New Energy) are less capex-heavy and higher in returns with a shorter gestation period, according to Goldman Sachs.
Goldman Sachs expects Reliance Retail’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) to nearly double between financial year 2024 – 2027 with the share of consolidated EBITDA increasing to 14.3% in financial year 2027 from 12.4% in financial year 2023.
For the New Energy vertical, Goldman expects positive EBITDA contribution to begin from financial year 2025 and reach $2.3 billion by financial year 2030.
On a consolidated basis, Goldman Sachs expects RIL’s free cash flow, which has largely remained negative due to the elevated capex, to turn positive in financial year 2025 with capex likely peaking out in the previous financial year, while EBITDA may expand by 20% year-on-year led by a telecom tariff hike, higher retail same-store sales growth and a recovery in chemical margins.
The brokerage expects a 17% EBITDA CAGR between financial year 2024 – 2027 driven by:
Retail EBITDA nearly doubling during this periodA 22% EBITDA CAGR in the telecom business, driven by higher telecom ARPUThe continued shift of consumers to smartphones and strong traction in fixed broadbandPetchem margin recovery driven by global demand and lower feedstock pricesSustained strength in diesel cracks due to limited global spare capacity compounding with Opex reduction
Reliance Industries’ shares tend to outperform the Indian market during two scenarios, according to Goldman Sachs: One being expanding returns and two being valuation discovery through stake sale in newer businesses.
“Over the last two years, both these drivers were largely absent, potentially driving the shares’ underperformance. We expect rising returns ahead which could compound with further potential value unlock through potential listings of consumer businesses,” the note said.
Last week, brokerage firm UBS had also increased its price target on Reliance Industries to ₹3,400 from ₹3,000 earlier. This ₹3,400 price target is the highest for Reliance Industries on the street.
Shares of Reliance Industries have risen 29% over the last 12 months.
