RIL share price: Reliance Industries shares could see an upside of up to 46 per cent from current levels, according to brokerage firm Nuvama, which has maintained its BUY rating on the stock despite revising its target price. Following the company’s September quarter results, Nuvama has cut its target price to Rs 1,703 from Rs 1,766.
The brokerage remains positive on Reliance’s long-term growth prospects, driven by its New Energy business, strong performance in Oil-to-Chemicals (O2C) and Jio. However, weakness in the retail and oil and gas businesses remains a concern.
Reliance Industries Q2 results: EBITDA beats estimates
Reliance Industries reported an EBITDA of Rs 56,600 crore for the September quarter, registering a 23 per cent YoY increase. The figure was around 9 per cent higher than market estimates.
The strong performance was primarily supported by the O2C and Jio businesses. However, the retail and oil and gas segments reported relatively weaker performance, limiting the overall growth momentum.
Nuvama believes that the company’s core businesses continue to provide earnings support, while its upcoming New Energy operations could create an additional growth opportunity over the next few years.
New Energy business to start contributing to earnings from FY28
Reliance Industries’ New Energy business is expected to become an important earnings driver from FY28, with the company accelerating the development of its manufacturing and renewable energy infrastructure.
The company has already commissioned 6GW of solar module and 5GW of solar cell capacity. It plans to increase its solar module and cell manufacturing capacity to 20GW by early next year.
According to Nuvama, a 10GW manufacturing capacity in the New Energy business could contribute around 5 per cent to Reliance Industries’ earnings.
The company is also preparing to commission a 40GWh Battery Energy Storage System (BESS) capacity in FY27, which could eventually be expanded to 120GWh.
Additionally, Reliance plans to commission 2GW of transmission line capacity over the next few months, followed by another 3GW by March 2027.
The company is also developing infrastructure to support 150GW of round-the-clock (RTC) renewable power capacity. This is expected to help reduce its own power generation costs while supporting its long-term clean energy ambitions.
Why has Nuvama retained BUY rating on Reliance Industries?
Nuvama has maintained its BUY recommendation on Reliance Industries despite reducing the target price from Rs 1,766 to Rs 1,703.
The brokerage values the stock at around 18 times its estimated FY28 earnings per share. It has also applied a 25 per cent holding company discount, factoring in Jio’s potential listing.
Despite the reduction in the target price, Nuvama sees significant scope for earnings growth as Reliance scales up its New Energy operations.
The brokerage believes the expansion of the New Energy business could create an opportunity for more than 50 per cent growth in the company’s earnings. It could also support an improvement in the company’s overall valuation.
The New Energy business could provide additional benefits to Reliance’s O2C operations, particularly as the company works towards its target of achieving net-zero carbon emissions by 2035.
What are the key triggers for Reliance Industries shares?
According to Nuvama, the expansion of the New Energy business, strong refining margins and the potential listing of Jio could act as important triggers for Reliance Industries shares.
The expected earnings contribution from New Energy operations from FY28 could strengthen the company’s long-term growth outlook. Meanwhile, the performance of O2C and Jio will remain important for near-term earnings.
Overall, Nuvama has retained its positive stance on Reliance Industries, with a revised target price of Rs 1,703, implying an upside potential of approximately 46% from the current market price of Rs 1,164.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)