Reliance Industries shares rally 6% in two days; here’s why

Shares of billionaire Mukesh Ambani-led Reliance Industries (RIL) surged 6% in the last two sessions, in sync with BSE benchmark Sensex which rose 1.8% during this period. The index heavyweight trades 3% lower than its all-time high levels of ₹2,855 touched on April 29, 2022. It hit a 52-week low of ₹2,016.60 on July 28, 2021.

On Friday, RIL shares opened higher at ₹2,746.95 against the previous closing price of ₹2,724.50 on BSE. In the first hour of trade so far, the country’s most valued stock gained as much as 2.7% to hit a high of ₹2,798.15, driven by a spurt in volume trade. The stock was also among the top contributors to the 30-share Sensex, which was trading 530 points higher at 56,346 levels, following strong cues from global peers.

On the volume front, as many as 1.05 lakh shares worth ₹29.15 crore changed hands over the counter in early trade compared with a two-week average volume of 2.64 lakh stocks. The market capitalisation of the oil-to-telecom conglomerate increased by ₹46,747 crore to ₹18.90 lakh crore.

Technically, Reliance shares traded in a bullish range, moving higher than its 5-day, 20-day, 50-day, 100-day, and 200-day averages. RIL share price has risen 6.75% in a week, 4% over a month, and 16.5% in the calendar year 2022. The stock has delivered 27% returns in the past one year.

Investors are betting high on Mukesh Ambani-led country’s largest private sector enterprise amid report that the company plans to acquire small and medium-sized consumer goods companies and brands across the country to build its FMCG business which can rival the likes of Hindustan Unilever (HUL), Nestle and P&G. The recent acquisitions also added optimism to the stock.

On June 1, Reliance Brands (RBL), a part of the retail arm of Reliance Industries (RIL), signed a joint venture arrangement with Italy's Plastic Legno SPA to acquire a 40% stake in the latter's toy manufacturing business in India, the company said in a release on Wednesday. The investment is expected to serve a dual purpose of bringing in vertical integration for RBL’s toy business and helping diversify the supply chain with a long-term strategic interest in building toy manufacturing in India.

Among others, RBL recently signed a deal with Italian luxury lifestyle Tod’s SPA to retail its brand across all categories including footwear, handbags, and accessories in the Indian market. Adding to it, it also acquired a 51% majority stake in couturiers Abu Jani Sandeep Khosla (AJSK) for an undisclosed amount.

RIL’s solid financial performance also boosted demand for the stock. For the January-March quarter of 2022, Reliance reported a 22.5% year-on-year growth in its consolidated net profit to ₹16,203 crore on the back of strong performance by digital services and retail segments. The consolidated revenue from operations jumped 36.8% YoY to ₹2.1 lakh crore in Q4 FY22. During the quarter under review, RIL's EBITDA jumped 27.7% to ₹33,968 crore as compared to the corresponding period of the previous year, helped by strong operating performance in retail and digital services business.

For the full financial year 2021-22, the net profit rose 26.2% YoY to ₹67,845 crore, while gross revenue for the year stood at ₹792,756 crore, up by 47% on yearly basis. EBITDA for the year grew 28.8% YoY to ₹125,687 crore for the fiscal ended March 31, 2022.

The board of the Mumbai-headquartered company also recommended a dividend of ₹8 per equity share of ₹10 each for the financial year ended March 31, 2022.

Post Q4 results, most analysts remain bullish on the stock. Domestic brokerage firm ICICI Securities had recommended “ADD” rating, with a target price of ₹2,865 per share versus ₹2,960 estimated earlier. Analysts at YES Securities had also given “ADD” call, with a revised target price of ₹2,840 apiece, on sum-of-the-parts valuation (SOTP) SOTP basis.