RIL m-cap drops Rs 1 lakh crore in 10 sessions! Share price targets, analyst views & more

Reliance Industries Ltd has seen its market capitalisation (m-cap) falling over Rs 1 lakh crore in 10 trading sessions to Tuesday, with the much awaited annual general meeting failing to cap the m-cap fall. RIL commanded a m-cap of Rs 16,38,024.32 crore on Tuesday morning, which was Rs 1.05 lakh crore lower than August 14's market cap of Rs 17,43,457.14 crore. Analysts said RIL's AGM announcements were largely neutral.

At its AGM, RIL reiterated its plan to transition its oil-to-chemicals (O2C) business into a consumer-integrated chemicals & materials business. RIL restated its New Energy business roadmap and its Rs 75,000 crore capex commitment and announced its foray into wind power generation. Other announcements included the target for pan-India 5G rollout by December 2023, the launch of Jio AirFiber on September 19 and also Jio Financial's entry into insurance segment. RIL also plans to setup a battery giga factory by 2026 with its first CBG plant commissioned in Uttar Pradesh. A few analysts see up to 20 per cent upside potential for the stock ahead.

Led by a sharp uptick in capital employed that keeps running well ahead of earnings growth, return on capital employed has remained at moderate levels over the last 4-5 years, said ICICI Securities. Despite a near-18 per cent CAGR in operating earnings over FY20-FY23, free cash flow earned during the period has remained muted, it added.

"Aggregate FCF earned during FY20-FY23 is a negative Rs 76,000 crore, with a small positive FCF earned in FY20 and FY22 offset by a sharply negative FCF of ~INR 1trn seen cumulatively in FY21 and FY23. While our estimates suggest a solid 18.6 per cent CAGR in earnings over FY23-FY25E, our concern on muted return ratios and limited FCF yield remains," ICICI Securities said.

JM Financial said it has a target of Rs 2,900 on the stock as net debt concerns are overdone, and also because RIL has industry leading capabilities across businesses to drive robust 14-15 per cent EPS CAGR over the next 3-5 years.

"We marginally fine-tune our FY2024-26E consolidated Ebitda largely on 3 per cent cut in retail Ebitda. We believe the outlook for RIL’s each key business remains robust. Energy should benefit from high refining margins, improvement in petchem spreads and rising KG basin production. We expect market share gains to continue for R-Jio, with a likely increase in tariffs after the 2024 general elections. For retail, the growth should sustain at a fast clip, driven by a ramp-up of newly added stores, rising new commerce shares and FMCG foray," Kotak Institutional Equities said while suggesting a revised fair value of Rs 2,600 against Rs 2,700 earlier.

Prabhudas Lilladher finds the stock worth Rs 2,898. Nomura India has a target of Rs 2,925 for the stock. Motilal Oswal sees the stock at Rs 2,920.

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