Reliance shares rise on robust Q2; here’s what analysts say on RIL valuations

Shares of Reliance Industries (RIL) opened higher on Monday, in an otherwise weak broader market, as investors reacted positively to September quarter earnings report of billionaire Mukesh Ambani-led conglomerate. Most analysts remain bullish on the stock, with 11 analysts offering long term price targets for RIL at an average level of ₹2,817.89, indicating an upside potential of around 24% from the current market price, as per Trendlyne, a stock market analysis plaftform.

Reacting to Q2 numbers, RIL shares opened higher for the second straight session at ₹2,283.95, up 0.8% against the previous closing price of ₹2,265.25 on the BSE. In the early trade so far, the Sensex heavyweight gained as much as 1.2% to ₹2,310.10, while the market capitalisation rose to ₹15.55 lakh crore.

In contrast, the BSE benchmark Sensex was trading 211 points, or 0.33%, lower at 63,570 levels, with 26 of 30 constituents slipping in the red zone.

At the current level, RIL shares trade nearly 12% lower than its 52-week high of ₹2,635.17 on July 19. 2023, while it is up around 15% from its 52-week low of ₹2,012.14 touched on March 20, 2023.

The share price of the country’s most valued firm has delivered a negative return of 9% in the last one year, underperforming the Sensex, which rose over 6% during the same period. In the calendar year 2023, RIL shares dropped nearly 9.7% as compared to a 4.7% rise in the Sensex. In the past six months, RIL shares lost 5.6%, while it shed over 9% in 3 months; and around 2% in a month.

In a post market release on Friday, RIL released its earnings report, which showed that its consolidated net profit (attributable to owners of the company) grew 27% year-on-year (YoY) to ₹17,394 crore, driven by consumer businesses. The consolidated revenue from operations increased marginally from ₹2.32 lakh crore in Q2 FY23 to ₹2.35 lakh crore in the corresponding period last year. The EBITDA grew 30.2% to ₹44,867 crore in Q2 FY24 as compared to ₹34,447 crore in the same period last year, while margin improved by 390 basis points YoY to 17.5% from 13.6% in the year-ago period.

Mukesh Ambani, Chairman and Managing Director, Reliance Industries Limited says, “Strong operational and financial contribution from all business segments has helped Reliance deliver another quarter of robust growth.”

Segment-wise, revenue for Jio Platforms increased by 10.6% YoY to ₹31,537 crore, led by 7.5% rise in subscriber base and higher Average revenue per user (ARPU). Retail Ventures Limited reported 18.8% YoY rise in revenue at ₹77,148 crore, aided by growth momentum across consumption baskets, led by food & grocery which grew by 33%.

Meanwhile, revenue from the oil and gas segment increased significantly by 71.8% YoY to ₹6,620 crore with incremental production of gas and condensate from MJ field. O2C revenue declined by 7.3% YoY to ₹1.47 lakh crore with 14% decrease in crude oil prices leading to lower price realization for products.

Here’s what analysts say on RIL Q2 numbers.

Foreign brokerages Morgan Stanley, Jefferies, Nomura, and Macquarie remained positive on stocks as Q2 earnings topped most of analysts’ estimates.

Nomura India has retained its 'Buy' rating on RIL shares with a target of ₹2,925, while Jefferies raised its price target to ₹3,000 from ₹2,095 estimated earlier.

Morgan Stanley has maintained its share price target on the stock at ₹2,821, while Macquarie upgraded the stock to neutral from 'underperform' and hiked its target to ₹2,200 from ₹2,100.

Among domestic brokerages, Motilal Oswal Securities has given a target of ₹2,760 on the stock, saying that there is scope for rapid expansion in its retail business and the aggressive rollouts of the digital platforms.

Sumeet Bagadia, Executive Director at Choice Broking, says Reliance share price may touch ₹2,300 and ₹2,350 apiece levels. Investors can hold RIL in their portfolio with trailing stop loss at ₹2,210 for a near term target of ₹2,350 levels.

Sabri Hazarika of Emkay Global retained a ‘Buy’ rating with a price target at ₹2,730 per share, on the back of steady earnings outlook and peaking-out of the current capex cycle.

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