RIL share price | Why the target price on the Reliance stock is rising
Reliance share price: UBS, with a buy rating, has raised the target price on RIL shares to ₹3,000, which means it expects the stock to see a rally of more than 19%.
Reliance shares traded over a percent higher on December 19 as analysts expected an additional upside of up to 20% with an eye on the conglomerate’s consumer businesses and premiumisation plan.
Premiumisation is a term used to describe a company or a brand's attempt to make its customers pay more for a product or service, either by offering better value, adding meaning or offering some kind of exclusivity. For example, a limited edition of a watch or sneakers is likely to fetch a higher price compared to those with no limit on their production.
Switzerland-based brokerage UBS, with a buy rating, has raised the target price on RIL shares to ₹3,000, which means it expects the stock to see a rally of more than 19% from the December 18 closing price.
Its American peer Morgan Stanley, meanwhile, has set the target price at ₹2,821 and has an overweight call on the stock.
UBS believes that the Mukesh Ambani-led conglomerate’s consumer businesses are in focus and that leverage concerns are overdone. The consumer business segment could contribute around 85% of incremental EBITDA over FY23-26 (versus only around 40% over FY21-23), taking their share in segment earnings before interest, taxes, depreciation, and amortisation (EBITDA) from 49% in FY23 to 58% in FY26.
However, the brokerage noted that investors are yet to appreciate the firm’s consumer businesses-led earnings growth. It is of the view that improving earnings could generate sufficient free cash flow to reduce debt beyond FY24.
UBS expects Reliance’s retail and digital businesses will need less capital going forward. It also said that new energy opportunities have not been fully priced in yet.
WATCH: Reliance Industries' roadmap for its new energy business, where it plans to invest as much as ₹75,000 crore.
Morgan Stanley took note of Reliance Jio’s new bundled mobile plans, OTT subscriptions and Jio Cinema premium subscriptions for prepaid consumers.
Jio Cinema Premium (an ad-free streaming of its content available at ₹999 per year) — where the company has invested about $2.3 billion in the last two years — will support Reliance in monetising its investments in 5G, according to the investment bank.
Reliance shares, which have given a return of over 9% in the past month, were trading 1.23% higher at ₹2,550 on BSE at 11:46 am.
(Edited by : Amrita)
First Published: Dec 19, 2023 12:25 PM IST
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