Shares of Reliance Industries corrected 18 percent since November 2022, bringing the price-to-earnings ratio to a 6 percent discount over the long-term average. According to foreign brokerage firm Jefferies, this presents an attractive opportunity for investors.
The firm has a target price of Rs 3,100 on the stock which is a 42 percent upside from its 52-week low. The 52-week low of Rs 2,180 was hit on March 20 amid broad market selloff.
"The company has $120 billion of equity and current net-debt-to-equity ratio at 0.3x is near a 22-year low. Thus, the current capex cycle is said to be different from the one in the last decade," Jefferies said in its report. This is expected to have a positive impact on RIL's earnings, with limited downside risks.
Tariff hikes have been pushed out, and little value is being ascribed to new businesses like green energy, FMCG, financial services and new petchem investment at current market price, it added.
For the retail business, Jefferies is projecting 30 percent core revenue growth, 25 percent Ebitda (earnings before interest, taxes, depreciation and amortisation) growth for FY24.
"Falling energy prices have opened up room for removal of export duty that should remove a regulatory overhang. So, tariff hike in Jio, acceleration in retail throughput, removal of export duty and China's demand recovery are triggers," analyst Kunal Shah noted in his report.
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