Reliance Industries Shares Show Potential for 32 Percentage Rally, says Kotak Securities
Kotak Securities, a domestic brokerage firm, has stated that Reliance Industries (RIL) is a compelling buy, with the potential to rally up to 32%. After correcting nearly 20% from its peak of ₹2,856.15 per share, Kotak believes that the market is not ascribing any value to RIL’s New Commerce/FMCG forays, New Energy or duopoly benefits in R-Jio.
RIL Trading Higher
Shares of RIL were trading 1.84% higher at ₹2,243.90 on the National Stock
Exchange in Monday's trade. As of 20 March 2023, the stock has reached a 52-week low of ₹2,180, resulting in a year-to-date correction of over 12%. The recent underperformance of RIL has been puzzling, given the sanguine outlook across key verticals.
Kotak Securities has reiterated its recommendation to 'Buy' the stock, but with a revised fair value of ₹2,900, lower than the earlier ₹3,000. The brokerage has reduced its EBITDA estimate for
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2024-25 by 4-5%, mainly due to the delayed tariff hike assumptions in Reliance Jio. The note mentions that the 5G rollout will be completed this year, and the capex will moderate from current levels but remain at ₹1.0-1.1 lakh crore due to expansion in retail and new energy investments. The brokerage expects high earnings with lower export tax in refining, rising volumes, elevated prices in E&P, and recovery in petchem spreads
for the energy segment. However, in the telecom vertical, the brokerage expects rising competitive intensity and likely delay in tariff hikes until 2024 elections. The recent acquisitions, store expansions, and entry into new verticals have led Kotak to believe that RIL will have market leadership across several verticals in the retail business. Overall, the stock has significant potential in the current market situation, and investors may want to consider this recommendation.