Mukesh Ambani’s Reliance Industries Ltd’s (RIL) share price has charted a sharp up-move in recent trading sessions, gaining nearly 7% and closing in on its all-time high. After having risen more than 3% on Tuesday, while benchmark indices tanked, the stock continued its upward trend, rising another 3% on Wednesday to hit a high of Rs 2,730 per share. Analysts believe that Reliance could now take the lead once again and help the benchmark move higher, after having remained largely range-bound since October last year.
Energy play on Dalal Street
“Petchem business is doing its best in the last 4 years. Polyethylene is doing its best on pricing,” said Rahul Sharma, Director & Head – Research, JM Financial. He added that for Reliance Industries, this quarter refining margins are going to be above $11, and Singapore margins are trading above $12.
The energy theme has started playing on Dalal Street with the S&P BSE Energy index zooming 21.48% since February 24. Commodity prices have rallied amid the Russia-Ukraine war. Reliance Industries’ refining business as well as the newly carved out green energy business is expected to benefit the company as this trade plays out. Earlier this week, Morgan Stanley added Reliance Industries to its GEM list after removing OTP Bank. “The addition of Reliance Industries further supports our overweight of the Energy sector within GEM, and is a top pick of Morgan Stanley’s Oil and Gas analyst for India,” they said. Analysts at Morgan Stanley believe multiple positive triggers are lining up for RIL to outperform. “Of Interest, these triggers are in areas where investors have been most sceptical — new energy with battery incentive wins, refining margin pickup, and asset monetisation for petcoke gasifiers.”
Recently, Motilal Oswal and Goldman Sachs have also reiterated their positive views on the green energy unit of Reliance Industries. Those at Goldman Sachs see Reliance Industries as a unique energy transition story. They added that RIL’s strong cash flow generation of the old energy business can fund the Capex of the New Energy business and in turn drive one of the fastest and most profitable net-zero transitions by 2035 amongst large energy companies.
Other business verticals aiding growth
Mukesh Ambani’s Reliance is a behemoth on Dalal Street with businesses ranging from refining, chemicals, retail, digital, and telecom. Vishal Wagh of Bonanza Portfolio said that major investments that Reliance Industries has attracted over the last few years into retail and Jio are now bearing fruit for the company. He added that profitability in those verticals is now visible to investors. Reliance managed to attract investments from Facebook, and Google, along with major private equity firms in 2020 and 2021, selling stakes in Jio and Reliance Retail.
Further, various business verticals have been performing well. Rahul Sharma of JM Financial highlighted that Reliance Retail, after the economy opened up, saw its unlisted entity rates jump more than 10% in the last 15 days. Currently, the stock is trading at Rs 3600 in the grey market. While Jio has lost customers recently, it remains the largest telco in the country with 402.73 million subscribers.
More upside ahead?
Reliance Industries led the Nifty pack when the index soared from March 2020 lows to double in value in 2021 but after that took a breather. Now, Vishal Wagh said that Reliance Industries again look set to dominate as the index gears up for a fresh up-move. Wagh had given a buy call on Nifty earlier and is now suggesting investors ‘hold’ the stock in the near term with a stop loss below Rs 2,200 per share.
Rahul Sharma has a ‘Buy’ call on Reliance Industries with a positive bias, adding that his short term target is Rs 2,750 per share.
Additionally, analysts at Motilal Oswal have given a buy call on the scrip with a target of Rs 2,800 and a stop loss of Rs 2,560 per share.