Reliance Industries Limited is the largest private-sector corporation in India. The company, managed by the most prosperous Indian Mukesh Ambani, has evolved from being a textiles and polyester company to an integrated player with interests across energy, materials, retail, entertainment, and telecom.
The company derives 50% of its revenue from its petroleum refining business. Its retail business contributes over one-fifth of its revenue, the rest coming from telecom, petrochemical, oil exploration, and media businesses. The company’s non-core businesses, retail and telecom, are growing rapidly, contributing more and more to its revenue yearly.
The growth impacton the company’s businesses is reflected in Reliance share price. As of June 2022, the stock has delivered nearly 300% returns in the last five years. This has been when its telecom and retail businesses have come by themselves. The outlook on its share price is still bullish.
Analysts at ICICIdirect, in their latest commentary, said the company is gearing up for accelerated growth. They said the long-term prospects and dominant standing of RIL in each product and service portfolio provide comfort for long-term value creation. “RIL’s consumer business will be the growth driver, going ahead. The company has a strong balance sheet post fundraising while its traditional business will generate healthy cash flows owing to favourable refining scenario in the near term,”ICICIdirect says.
Thus, the broker has a BUY recommendation on the stock. It has set a 12-month target price at Rs. 3,050, meaning a potential upside of 12% from hereon. According to ICICIdiect, among the key triggers for RIL share price going ahead are:
-Increment value accretion from the ‘digital ecosystem’ that will be captured at the Jio Platforms level
-Steady free cash flow generation in the retail segment would enable the company to maintain debt at lower levels and improve its ability to invest in future inorganic opportunities
-Healthy cash flow in the oil to chemicalsegment is expected in the near term owing to higher product cracks. It will enable RIL to invest in new energy verticals.
Recent financial performance
ICICIdirect said Reliance share results for the quarter ended March were below estimates on the profitability front because of weaker than expected oil to chemicals earnings. The company said its revenue was up by 36.8% year on year to Rs. 2,11,887 crore as all segments reported revenue growth. It grew 10.8% quarterly, led by O2C and digital service.
The company’s EBITDA or Earnings Before Interest, Taxes, Depreciation, and Amortisation were at Rs. 31,366 crore, up 34.3% YoY, 5.6% QoQ. EBITDA growth was driven by O2C (up 24.8% YoY) and digital service (up 25.3% YoY) mainly because of higher refining earnings in O2C coupled with the tariff hike undertaken by Jio in December 2021.
Net profit was at Rs. 16,203 crore, up 22.5% YoY. Though it declined 12.6%QoQ owing to lower other income and a one-time gain of Rs. 2,836 crore reported in December quarter, explained ICICIdirect.