Reliance Industries (RIL) share price was down 4% on Thursday amid a global stock market rout, but analysts have in recent days reiterated bullish outlook on Mukesh Ambani stock due to strong growth in Reliance Retail and Jio telecom.
Reliance Industries (RIL) share price was down 4% on Thursday amid a global stock market rout, but analysts have in recent days reiterated bullish outlook on Mukesh Ambani stock due to strong growth in Reliance Retail and Jio telecom. Oil-to telecom conglomerate RIL’s stock has fallen 4.2% so far this year, outperforming benchmark indices Sensex and Nifty 50 — both down 6%. RIL shares hit a low of Rs 2,277 per share on Thursday.
RIL stock target price implies strong upside
In recent days foreign brokerage firm Bernstein and domestic brokerage JM Financial have released reports reiterating their bullish calls on RIL stock. Analysts at Bernstein are gung-ho about the prospects of Reliance Retail terming it as the “King of India Retail”. Those at JM Financial are banking on Jio’s potential to monetise the huge digital opportunity in India’s digital market. Bernstein has an ‘Outperform’ rating on the stock with a target price of Rs 2,830 apiece, while JM Financial has a ‘Buy’ call and target of Rs 2,815 per share. The upside potential from today’s lows ranges between 23-24% for RIL stock.
Retail unit to push RIL higher
Bernstein highlighted that Reliance Retail continues to execute strongly and has grown its retail footprint by 39% (in sq ft) since the pandemic began and added multiple brands and expanded its digital/new commerce. “We expect Reliance Retail to grow at ~30% CAGR over FY22-25 while expanding margins,” the foreign brokerage firm said. Mukesh Ambani’s retail business is India’s largest organised retailer in terms of revenue and store network. It has more than 14,000 stores in India spread over 40 million sq. ft. Analysts said that Reliance Retail’s revenue has grown 5 times in the last five years.
Reliance Retail has a web of e-commerce brands such as Dunzo, Milkbasket, JioMart, Ajio, among others. The company also has offline retail stores, JioPhone Next, and Just Dial as its offerings. Digital commerce orders grew 2x on-year in the recent quarter while merchant partner orders grew by 4 times. Digital and new commerce account for 20% of core retail sales of retail unit.
Jio’s monetisation opportunity
Analysts at JM Financial have focused on the huge growth potential in India’s digital market and how Jio can benefit from the same. Jio has more than 416 million telecom subscribers and stakes in various digital platforms, adding to this, the company has a large number of apps, which improves subscriber stickiness. These along with an efficient business structure gives Jio an edge over peers.
Jio has evolved from a pure-play telecom provider to a tech enabler, according to JM Financial. “Currently, Jio houses the enterprise and consumer suite of apps as well as the infrastructure business of Jio’s payment app (design, development and operation of the app),” they said. The brokerage believes Jio is better placed to take advantage of digital monetisation opportunities due to its stake in various digital/tech platforms. JM Financial highlighted that India’s digital market is likely to grow 4-5x to $1 trillion by the financial year 2024-25. Jio’s digital assets are valued at $15 billion by the brokerage firm.