Reliance Industries stock offers favourable risk-reward ahead of AGM, says BofA Securities

BofA Securities on Wednesday said Reliance Industries Ltd (RIL) offers a favourable risk-reward, especially as one heads into its annual general meeting (AGM). The foreign brokerage said RIL has, in the past, made key announcements on value unlocking catalysts and also future growth plans at its AGMs. It expects similar announcements this year, especially around Jio Financial Services (JFS), clean energy and digital business.

Shares of RIL have historically outperformed going into the AGM on most instances, the foreign brokerage noted.

"RIL has indicated that they intend to spin-off the financial services arm and have already indicated the demerger process. By separating financial services from the core business, RIL appears to be keeping arm's length transaction from other entities, and in theory helping them better to attract strategic or JV partners who are keen only in financial services arm - like what they did with Reliance Jio or tower InvIT," it said.

With Jio making investments in 5G, BofA Securities said it sees further room for the company to gain market share. Furthermore, any better-than-expected revenues in fiber broadband or digital initiatives could surprise positively, it said.

In the retail segment, Reliance Industries is the only retail company that is present in a strong position across all thee formats namely modern trade, online (mainly grocery & fashion) and unorganised B2B market.

"The company is also foraying into 'high margin' niches like chocolates, cosmetics, beverages by making acquisitions. With improving scale, we also expect the Ebitda momentum at this business to remain strong," BofA Securities said while suggesting a price target of Rs 2,775 on the RIL stock.

In the oil to chemicals (O2C) segment, BofA Securities said it find this business well-positioned to generate $9-9.5 billion Ebitda for the next 3 years providing cash-flow stability. It also considers RIL to be one of the very few Indian companies who have potential to be big in clean energy space mainly in solar, battery, electrolyser & fuel cells as they are setting gigafactories.

Also read: Hot stocks on June 5, 2023: HPL Electric, Suzlon Energy, Brightcom Group, MRPL and mor

Also read: SAIL records best-ever Q1 production, sales volume; stock up 2%