PL Stock Report: Reliance Industries (RELIANCE IN) - Event Update - Continued emphasis on new age technologies - BUY
Prabhudas Lilladher Pvt Ltd
Reliance Industries (RELIANCE IN) - Swarnendu Bhushan - Co-Head of Research, Prabhudas Lilladher Pvt Ltd
Rating: BUY | CMP: Rs2,444 | TP: Rs2,898
Event Update - Continued emphasis on new age technologies
Quick Pointers:
§ Plans to establish 100 CBG plants in next 5 years across India.
§ On-track to launch Jio AirFiber on 19th September.
RIL at its 46th AGM reiterated aggressive growth plans across various business verticals. The company is on-track to complete its 5G rollout by CY23 and launch Jio AirFiber on 19th September. Likewise, Oil and Gas segment is on track to produce ~30 mmscmd of gas from the KG Basin. On new energy front, RIL plans to setup a battery giga factory by 2026 with its first CBG plant commissioned in Uttar Pradesh. The retail segment will focus on rapid store expansion and brand partnership/acquisitions to accelerate growth.
We believe RIL provides a good investment opportunity given 1) its transition towards new age technologies and 2) cash flow for growth serviced from traditional refining and petrochemical segment. The company is trading at 12.8x FY24 consolidated EV/EBITDA and 22.7x FY24 consolidated PE. We estimate consolidated EPS CAGR of 10.7% for FY23-FY25E and value Refining and petrochemical segment at 7.5x FY25 EV/EBITDA, Digital services at 15x FY25 EV/EBITDA and Retail at 37x FY25 EV/EBITDA. Maintain ‘Buy’ at SOTP based TP of Rs2898. Key risks are project execution and technology risk in new energy.