Should you buy Reliance Industries stock for less than Rs 2,250?

Reliance Industries has been a delight for investors since Mukesh Ambani-led (RIL) raised capital amid the pandemic. Ambani, the only Asian tycoon among the top 10 richest people in the world, has been able to renew investors' interest in the stock unlocking value deals with global investors in last six months.

This is despite the alarming coronavirus pandemic that has brought large economies to a standstill.

As the company builds up a dominant presence in refining, petrochemicals, telecom and retail businesses, most analysts have kept a BUY rating for the conglomerate and raised the target price to Rs 2,500.

Since the beginning of 2020, Sensex has dropped 8.5% while Reliance Industries shares have risen 46%. RIL share closed at Rs 1,500 on December 31, 2019. On Sept 22, RIL shares ended at Rs 2,211 on BSE.

While Sensex has fallen 0.74% in one year, RIL stock has risen almost 76%. The market cap of the Mukesh Ambani-led conglomerate stood at Rs 14,01,738.80 crore on September 21. Reliance Industries became the first Indian firm to scale market cap of Rs 16 lakh crore for the first time on September 16, 2020.

The stock hit its 52-week low of Rs 867.82 on March 23, 2020. Since then, RIL- India's most-valued company-has seen its stock jump 172% to its all-time high of Rs 2,368.80 on September 16, 2020.

Even after being rated as an overvalued stock, RIL has been among the top picks of investors and analysts with its strong franchises, partnerships and growth plans. Company's growth prospects have made investors chase the stock post any short-term profit booking.

With Reliance's highly liquid balance sheet during the tough times of pandemic, analysts believe that the stock will continue to rise in the coming quarters. RIL became debt-free this year months ahead of the March 2021 target.

In a drive to tap the fast-growing market for online shopping, RIL's recent fundraising and acquisitions have helped it not only become debt-free but also put the firm on par with global eCommerce giants such as Amazon & Walmart. The large cap stock currently trades at Rs 2,250 level on BSE.

Kotak Institutional Equities has rated 'ADD' to RIL stock at a fair value of Rs 2,256, with an upside of 5%.

While Motilal expects the TP to rise towards Rs 2,450-2,500 zones in the next few weeks and Rs 2,650-2,700 in the next few months.

Axis Securities also expects bullish momentum towards Rs 2,500-2,540.

Morgan Stanley said, "We have an OW on Reliance Industries as we believe the company will benefit from the undercurrents in the telecom industry and increasingly foray into other digital businesses."

The brokerage laid down Risks to Downside as 1. A potential ban on single-use plastic to hurt margins in the medium term; 2. Lower utilisation of recently started downstream energy projects; and 3. Delay in the monetisation of its energy and telecom assets.

Execution on Jio Mart, rising market share and reduced competitive intensity in the Indian telecom industry and improvement in encore energy margins were the 'Risks to Upside', as per the brokerage.

"The company bounced back sharply post hitting a low of Rs 864 on March 23, enriching its shareholders in the most spectacular way," said Aamar Deo Singh - Head Advisory, Angel Broking.

Reliance Industries telecom business to witness robust growth over next few years due to tariff hikes and shift of subscribers from Vodafone Idea to other telecom players, suggested Angel Broking and rated 'Accumulate' to RIL stock, at CMP of 2,306 and a TP of Rs 2,543, with an upside of 10.3%.   

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