Synopsis: RIL's stock experienced a significant uptick, rising 3% on Friday and over 7% across three sessions, reaching Rs. 1,244.85. This surge added approximately Rs. 1.15 lakh crore to its market capitalization, elevating it from Rs. 15.72 lakh crore on March 4 to Rs. 16.87 lakh crore. Despite a 16% decline over the past year, recent bullish trends have emerged. Brokerages have issued positive outlooks, with target prices ranging between Rs. 1,400 and Rs. 1,600.
In recent trading sessions, Reliance Industries Limited (RIL) has demonstrated a remarkable recovery.
On Friday, the stock rose by 3%, culminating in a total increase of over 7% across three consecutive sessions, settling at Rs. 1,244.85.
This upward trajectory resulted in a substantial boost to its market capitalization, which escalated by approximately Rs. 1.15 lakh crore—from Rs. 15.72 lakh crore on March 4 to Rs. 16.87 lakh crore.
This positive momentum follows a period where RIL's stock had experienced a 16% decline over the past year.
The downturn was attributed to various factors, including subdued market conditions and concerns over global trade dynamics.
Notably, the petrochemical (petchem) sector faced potential impacts from trade tensions; however, these effects have remained relatively muted.
Emkay Global observed that with refined oil and petchem import duties maintaining reasonable ranges, RIL's exposure to U.S. tariff risks in its Oil-to-Chemicals (O2C) business is minimal.
The recent surge has attracted attention from several brokerage firms, leading to optimistic forecasts for RIL's stock.
Kotak Institutional Equities highlighted the significant correction of 22% over the past year, primarily due to underperformance in the retail segment.
They anticipate the conclusion of the store rationalization phase and suggest that forthcoming developments, such as potential IPO timelines for the telecom division and possible tariff hikes, could act as catalysts for the stock.
Consequently, they have upgraded RIL to a 'BUY' rating with a fair value of Rs. 1,400.
Similarly, Jefferies has maintained its 'Buy' stance on RIL, setting a target price of Rs. 1,600.
They attribute the previous underperformance to a slowdown in the retail sector and subdued earnings in the O2C segment.
However, they believe the current market capitalization implies a valuation for the retail segment that is significantly lower than during the last funding round, indicating potential undervaluation.
Emkay Global also acknowledges a conservative outlook on certain business segments, including Jio and upstream operations, leading to a reduction in RIL's earnings per share estimates for FY25-27 by 6-13%.
Nonetheless, they anticipate that the retail segment is poised to resume its double-digit growth trajectory.
They have adjusted their target price to Rs. 1,450, reflecting an 8% decrease.
Despite these conservative assumptions, Emkay projects a 10% annual profit after tax growth for RIL during FY25-27, with potential upsides in the O2C and Jio segments.
Conclusion:
The recent performance of Reliance Industries Limited indicates a robust recovery, bolstered by positive investor sentiment and favourable assessments from leading brokerage firms.
While the stock had faced challenges over the past year, the current upward trend and optimistic forecasts suggest potential growth.
Investors are advised to consider these developments, alongside individual financial goals and risk tolerance, when evaluating investment decisions related to RIL.
Disclaimer: This article is intended for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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