Should you invest in Reliance Industries? Here's what foreign brokerages have to say

Global brokerages retained a mixed view on Reliance Industries (RIL) after the company’s 44th Annual General Meeting last week. While JP Morgan sees around 7% upside in the oil-to-telecom behemoth, Macquarie holds ‘Underperform rating on the stock with a 12-month target price of Rs 1,350.

Shares of the company traded 0.25% higher at Rs 2,109 at around 9.55 am (IST). On the other hand, the benchmark BSE Sensex was up around 18 points, or 0.03%, at 52,942.

Key highlights of the AGM

RIL’s 44th AGM on June 24, concluded with a clarion call towards accelerated adoption of renewables and commitment towards becoming net carbon-neutral by 2035. In the past, RIL has successfully transitioned from a textile manufacturer to a refining and petrochemical giant and to a telecom and technology major, adapting to the evolving business trends.

RIL last week announced a mega push into Renewables or New Energy with investments totalling Rs 75,000 crore in multiple projects over the next 3 years. As expected, the smartphone was also announced and so was the induction of Aramco Chairman into RIL’s board. However, there were no updates on O2C completion, Whatsapp-JioMart and no timeline on IPOs of Jio and Retail.

Commenting on the AGM, YES Securities said, “We believe, RIL is transforming yet again, adapting to the ‘New Normal’, where heightened focus on environmental protection and technological interventions would induce higher usage of petrochemicals, renewables and perhaps reduce consumption of fossil fuels.” The brokerage has a ‘Buy’ call on RIL with a price target of Rs 2,325.

Here’s what global brokerages have to say

JP Morgan revised the target price upward to Rs 2,250 by March 2022. Earlier, it had a price target of Rs 2,055 by December 2021. “We build in 1x proposed investment value to our SOTP and this, combined with a higher value for Retail (on higher peer group valuations). Over the next two years as RIL ramps up execution on these businesses, clearly, value accretion could increase from the investments.”

It also kept Ebitda estimates unchanged and assumed another year of the lower tax rate in FY22. “Operationally, refining remains weak, while petchem is robust (though down from March peak). Telecom tariff increase and GRM recovery remain the key earnings drivers. With the AGM behind us, investor focus will likely shift back to earnings from news flow,” JP Morgan said.

On the other hand, Macquarie said, “RIL trades on 28 times FY23E PE with a 7% return on equity (ROE) outlook and a negative medium-term free cash flow outlook. With our estimates of around 25% below consensus and RIL’s share price near our fundamental bull case, we maintain an ‘Underperform’ recommendation.”