Fundamental Radar: India’s largest company by m-cap is a long-term buy, Sneha Poddar tells why

Reliance Industries, part of the S&P BSE Sensex index, might have not done much on a year-to-date basis, but has managed to rally more than 10% from September lows.

Retail, telecom, and new energy could drive the stock of RIL with a market capitalisation of more than Rs 17.7 lakh crore, highest among India Inc. companies listed on the stock exchange, suggest experts.

Investors can look to buy the stock now or on dips for a possible target of Rs 2,855 which is also the record high registered on April 29, 2022, they say.



Last month, RIL unexpectedly reported a drop in the consolidated net profit for the September quarter, while consolidated revenue of the mainstay oil-to-chemicals business grew over 32% on year to Rs 1.59 lakh crore in the quarter. (Also Read: RIL Q2 Results: Cons PAT falls 0.2% YoY to Rs 13,656 crore despite sales growth)

The retail business’ revenue grew by nearly 43% on year to Rs 64,936 crore. The digital services business under the umbrella of Reliance Jio Infocomm registered a revenue growth of more than 21% to Rs 29,558 crore.

“Retail, telecom, and new energy can be the next three growth engines over the next two-to-three years, given the large technological advancements and ambitious growth targets,” Sneha Poddar, AVP, Fundamental Research, Motilal Oswal Financial Services, said.

There is strong traction in the retail biz with footfalls much higher v/s pre-Covid levels driven by the waning impact of the pandemic, improving customer sentiment, and early onset of festivities.

It opened 795 stores in Q2, taking the total store count to 16,617. It further launched “JioMart” on WhatsApp that saw a resounding 37% of orders from new customers.

“Accelerated store adds across segments, aggressive foray into digital and new commerce and healthy store economics should drive EBITDA growth,” she said.

RIL’s telecom business is likely to benefit from the market share gains from VIL, tariff hikes, wireline – Jiofibre subscriber additions and other digital avenues triggered by 5G rollout should drive growth.

“Large part of windfall tax-related de-rating is behind, so we expect stock to start performing. The management believes that geopolitical uncertainty and constrained supply is likely to keep gas prices on the higher side in the near term,” explains Poddar.

“We expect consolidated revenue/EBITDA to clock 14%/16% CAGR over FY22-24. We have a Buy rating with TP of Rs 2,855,” she recommends.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)