Reliance Industries Ltd Achieves Record Surge in Share Value
Remarkable Growth in Reliance Industries Ltd Stock:
Reliance Industries Ltd (RIL) witnessed a remarkable 5% surge in its shares, setting a new record. This growth marks the third consecutive session of gains, pushing the company’s market capitalisation to an impressive Rs 19.2 lakh crore. At 12.50 pm on January 29, the RIL stock reached an all-time high of Rs 2,850.
Strategic Moves Elevate Reliance Industries Ltd:
The recent climb in RIL’s stock value comes amid Bloomberg’s report of Walt Disney’s India unit facing a significant drop in valuation. This development occurred during the lead-up to its proposed merger with Mukesh Ambani’s media business. The valuation of Disney’s India assets now stands at around $4.5 billion, a stark contrast to the initial $10 billion demand. The proposed merged entity aims for an $11 billion valuation, with Disney holding a 40% stake.
Reliance Industries will have a 51% ownership in the combined entity, with the deal expected to be finalized in February, as reported by Bloomberg. The collapse of the Sony and Zee Entertainment merger, valued at $10 billion, removes a potential major competitor.
Financial Performance and Analysts’ Perspectives on Reliance Industries Ltd:
Throughout January, RIL’s stock has gained 8.6%, buoyed by positive assessments of peaking capital expenditures (capex) and robust retail performance. As a result, analysts have revised their target prices and maintained positive ratings.
In the third quarter, RIL’s capex dropped to Rs 30,100 crore, a 22% decrease from the previous quarter. This reduction was attributed to Jio’s completion of the 5G rollout across India and a slowdown in Retail’s expansion.
Future Outlook for Reliance Industries Ltd:
Analysts expect a decrease in retail capex and a significant reduction in Jio’s headline capex by FY25, enhancing free cash flow (FCF) and allaying concerns about rising net debt. With the completion of the 5G rollout, a slowdown in capex was noted in the December quarter.
Despite experiencing negative free cash flow over the past three years due to telecom investments, RIL is projected to generate positive free cash flow in the next two years, supported by a $20 billion annual EBITDA run rate. While net debt saw a slight increase in the December quarter, a downward trend is anticipated, bolstered by reduced capex and an improved EBITDA run rate.
CITI’s Analysis and Rating for Reliance Industries Ltd:
CITI has upgraded its EBITDA forecasts for FY24-26, driven by factors such as higher tariff hikes for Jio, strong retail performance, and O2C sector success. However, considering the stock’s recent performance, CITI perceives the risk/reward balance as more even and downgrades its rating to Neutral with a target price (TP) of Rs 2,910, which reflects a 12% potential increase.
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