Reliance shares can rally over 10% as it turns new energy vision into action, says analyst

Reliance Industries (RIL) shares were in focus in the trading session of March 21 as the heavyweight stock rose almost a percent in early trade.

Brokerage firm Motilal Oswal, with a buy call, has set a target price of ₹3,210 on the stock as it sees the Mukesh Ambani-led conglomerate turning its new energy vision into action. This implies it sees over 11% upside in the stock from the closing price on March 20.

The analyst expects the January to March 2024 quarter earnings of the oil-to-chemicals (O2C) unit of the company to remain robust. In the preceding quarter Reliance's O2C business reported revenue of ₹1.41 lakh crore compared to ₹1.44 lakh crore it reported during the same period last year and ₹1.48 lakh crore during the September quarter. EBITDA stood at ₹14,064 crore while the margin expanded 40 basis points from last year to 10%.

Motilal Oswal pointed to a sharp recovery in Singapore's gross refining margin to $7.4 barrel as compared to $5.5/bbl in the third quarter of 2023-24. It added that the key petchem spreads over naphtha are also stable on a quarter-on-quarter basis.

For the telecom business, meanwhile, the brokerage said it is building in 5% (Compound annual growth rate) CAGR for subscriptions and 4% average revenue per user (ARPU) over the FY24-26 period.

For Reliance’s retail business, Motilal Oswal expects a 29% CAGR EBITDA for the FY24-26 period led by store additions and productivity.

Reliance Industries shares traded 0.95% higher at ₹2,914.30 on BSE at 10:30 am. So far this year, RIL shares have given investors a return of 12.5% return as against which has risen 0.71% during the period.