Analysts are largely positive on the RIL stock. On September 11, the stock had 15 ‘buy’, nine 'outperform' and just one 'sell’ calls on the publicly available Reuters Eikon database.
In terms of EV/Ebitda, the RIL stock looks cheaper at 12.9 times compared with Walmart’s 21.3 times, Amazon's 17.6 times, Facebook's 19.3 times, Google's 19.2 times and Netflix’s 30 times, but it expensive to Apple’s 7.4 times and Exxon's 9.4 times.
NEW DELHI: Mukesh Ambani’s Reliance Industries is a telecom giant, a large retailer and oil & gas major all put together, and is a now $200 billion conglomerate. It took 41 years for the company to hit the $100 billion market value in 2018 (from 1977) and just two years to become a $200 billion company, making investors wonder whether it will be the next Google, Amazon, Facebook or Apple or China's Tencent in terms of growth.
A look at how analysts were estimating financials and valuations of these global firms at $200 billion and for RIL today throws up some interesting comparisons.
FINANCIALS:-
Revenue: In terms of one-year forward revenue estimates, RIL’s revenue projections today at $83 billion is higher than Google's $22 billion in 2007, Netflix's $29 billion in June, 2020, Tencent's $22 billion in 2015 and Facebook's $18 billion in September, 2014 but much lower than Apple's $108 billion in March, 2010, Amazon's $136 billion in April, 2015 and Walmart's $167 billion in March, 1999. Exxon even had a one-year forward revenue estimate of $205 billion, when it reached its $200 billion mark in April 2019, shows a study by Morgan Stanley.
Profit: In terms of earnings expectations, RIL's two-year EPS projections today lag behind those of Amazon, Facebook, Apple, Netflix or even Exxon, but equal Google's, when these global players were $200 billion firms.
Ebitda: In terms of one-year forward Ebitda estimates, RIL’s $16.3 billion beats Amazon, Walmart, Facebook, Google and most other big players, but lags a $35.6 billion estimate for Apple and $17 billion for Exxon.
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Valuations: In terms of EV/Ebitda, the RIL stock looks cheaper at 12.9 times compared with Walmart’s 21.3 times, Amazon's 17.6 times, Facebook's 19.3 times, Google's 19.2 times and Netflix’s 30 times, but it expensive to Apple’s 7.4 times and Exxon's 9.4 times. Finally, on a one-year forward P/E basis, RIL's 21.8 times is higher than Apple’s March, 2010 level of 14.5 times and Exxon's April, 2009 level of 19.4 times, but less than nearly all big firms. Amazon at $200 billion value was trading at 419 times!
Market-cap: Alphabet (Google), which hit the $200 billion mark in October, 2007, is now a $1.03 trillion company. Amazon, which touched that feat in April, 2015 is now a $1.56 trillion in size. Apple recently hit the $2 trillion mark, while Facebook is at $760 billion.
RIL tops $200b m-cap; here's what brokerages are saying about the stock
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Reliance Industries has become the first Indian company to cross $200 billion in market cap after the announcement of US private equity firm Silver Lake investing Rs 7,500 crore in Reliance Retail for around 1.75% stake in the company. The stock was up 5.7% at Rs 2,285 in afternoon trade. Brokerages said Silver Lake's announcement may be the start of more rounds of investments in the company's retail business, just like it happened with Jio. Here's what brokerages are saying:
Reliance Industries has become the first Indian company to cross $200 billion in market cap after the announcement of US private equity firm Silver Lake investing Rs 7,500 crore in Reliance Retail fo..
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-The deal price should help reduce investor concerns on RIL's retail valuations -See capital allocation, execution and de-gearing as key to the next leg of stock outperformance -RIL is likely to emerge stronger post Covid-19 with industry consolidation picking up pace in telecom, retail and global refining
-The deal price should help reduce investor concerns on RIL's retail valuations-See capital allocation, execution and de-gearing as key to the next leg of stock outperformance-RIL is likely to emerge..
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-Silver Lake's valuation of RIL's retail business is largely in line with valuation -Similar to the investments in Jio, this could be the start of another round of investments in its retail business -See no major catalysts over the next 6 months, and operational environment remains tough
-Silver Lake's valuation of RIL's retail business is largely in line with valuation-Similar to the investments in Jio, this could be the start of another round of investments in its retail business-S..
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-Silver Lake's investment in Reliance Retail Ventures at an equity valuation of Rs 4.2 trillion is comparable to Kotak Institutional's valuation of the retail business on NPV basis -See limited upside to RIL's stock, deployment of cash will be crucial in the medium term -Silver Lake’s transaction may perhaps mark the beginning of stake-sale in RIL’s retail business
-Silver Lake's investment in Reliance Retail Ventures at an equity valuation of Rs 4.2 trillion is comparable to Kotak Institutional's valuation of the retail business on NPV basis-See limited upside..
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-Announcements on further stake sales in retail could keep news flow supportive for the stock -Silver Lake deal values retail business at pre-money equity value of Rs 4.2 trillion -With the capital raise cycle in Jio largely complete, the deleveraging target achieved well ahead of guided timelines, and the price discovery in retail also now done without any major upside surprise, the focus is likely to shift to execution
-Announcements on further stake sales in retail could keep news flow supportive for the stock-Silver Lake deal values retail business at pre-money equity value of Rs 4.2 trillion-With the capital rai..
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-Fresh capital may come in handy in its ambition to become a strong online player in coming years given the battle is against players like Amazon, Flipkart -Swift pace of developments at Reliance Retail may raise investor concern for peers like DMart, Trent etc -India offers significant opportunity on favourable demographics, there is headroom for growth for peers too
-Fresh capital may come in handy in its ambition to become a strong online player incoming years given the battle is against players like Amazon, Flipkart-Swift pace of developments at Reliance Retai..
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-CLSA said the equity valuation of Silver Lake deal is 12% lower than the value it has assigned to Reliance Retail in its target price for September 2021 -RIL's current market-cap already bakes in full value from this and recent deal valuation benchmark for Jio and energy segments. -This and exhaustion of large inorganic triggers may cap near-term upsides, even as CLSA remains positive on the long-term opportunity that Reliance offers.
-CLSA said the equity valuation of Silver Lake deal is 12% lower than the value it has assigned to Reliance Retail in its target price for September 2021-RIL's current market-cap already bakes in ful..
What lies ahead for the RIL stock? Analysts are largely positive on the RIL stock. On September 11, the stock had 15 ‘buy’, nine 'outperform' and just one 'sell’ calls on the publicly available Reuters Eikon database.
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“While it’s hard to quantify, we believe RIL is garnering greater levels of enthusiasm from investors given the investments from global technology majors and also the digitisation pathway it has laid out. Also, with the backing of very strong energy cashflows and partners like Microsoft, Google and Facebook, there is more confidence in delivering on these digitisation plans,” Morgan Stanley said.
Shares of Reliance Industries have surged over 150 per cent from March lows and its weightages in the benchmark indices have jumped 14-17 per cent.
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Morgan Stanley’s India strategist Ridham Desai sees two implications from this.
“First, passive flows will keep rising. Secondly, and more importantly, given that several active manager mandates restrict ownership of single stock at 10 per cent of the fund size, such active funds will likely to continue to be underweight. Both these factors will create a virtuous demand cycle for the stock like we had seen during 2006-2007,” he said.
The brokerage is overweight on the stock and has a bull case price target of Rs 2,667, as asset monetisation accelerates. “We expect expansion in the retail segment to accelerate and market consolidation to drive growth in Arpu and refining margins by 15 per cent on our base case in F22,” it said.
