In its bull case scenario, Goldman Sachs sees up to 54% upside in Reliance Industries Ltd. by FY26, maintaining its strong outlook on the largest firm in India. The foreign brokerage firm has high hopes for businesses' value unlocking, improved capital expenditure allocation, risk-reward dynamics, and business tailwinds.
According to Goldman Sachs, RIL has made over $125 billion in capital expenditures over the past ten years, mostly in the more capital-intensive and longer-gestating industries of telecom and hydrocarbons. "While the capex cycle for hydrocarbons and telecom 4G completed during FY17-19, we saw an accelerated telecom capex cycle in 5G, which is now completing in FY24," it stated.
According to Goldman, the companies in which RIL plans to spend more over the next three years will require less capital expenditure overall, yield greater returns, and require less time to develop. According to the report, RIL shares typically perform better than the Indian market in two situations: growing returns and value discovery through stake sales in younger firms.
Reliance Industries (RIL) saw a gain of almost 2.5 percent in its shares during the Wednesday trading session, ending the day at Rs 2957.50. For a brief while, the corporation regained its daily market valuation of Rs 20 lakh crore. However, during the previous trading session, the stock had finished at Rs 2,884.15.
"Both of these factors have been mainly missing during the past two years, which may be the reason for the shares' underperformance. The brokerage continued, "We anticipate growing returns in the future (101/75/92 bps CROCI expansion in FY25E/26E/27E), which may compound with additional potential value unlock through potential.
According to Goldman, the oil to chemical business is primarily responsible for the rising returns ahead of the 101/75/92 bps CROCI expansion in FY25E/26E/27E due to capex decline and a 17% Ebitda CAGR, which is 6–10% above Bloomberg consensus. Bullish views on diesel are driving higher for longer GRMs, while bearish views on gas are leading to petchem cost curve advantages.
While the stock has increased by almost 15% so far in 2024, Reliance Industries' shares have stayed unchanged over the last month. Over the past six months, the stock has increased by 25%, and over the past year, it has increased by 32%.
"RIL is still valued using the SOTP method, but we move it ahead from September 2025 to March 2026. We have updated our offline retail valuation model from DCF to an EV/EBITDA multiple of 33 times as the company has stabilized its EBITDA margins and is expected to slow down its rate of growth to more normal levels," the statement read.
Value accretion from the Reliance-Disney JV is also taken into account. For the core refining and petrochemical business, we still use eight times FY26E EV/Ebitda, and for the high-growth TMT division, we utilize DCF. We increase our 12-month SOTP-based target pricing for RIL to Rs 3,400, or a 16% increase, according to Goldman. Its target price of Rs 4,495 in the bull scenario indicates a 54% increase.
Viacom18 and Star India, the respective subsidiaries of Reliance Industries and Walt Disney, have amalgamated in a move that benefits both parties. According to Elara Capital, RIL's media division will provide the most diverse range of content (catch-up TV series, original content, films, international material, and sports), supported by a massive distribution network through RIL's Jio mobile product.
"Jio is likely to charge for its premium content through Jio Prime or another similar bundled offering, which could be a great way to keep subscribers." In addition, combining this extensive range with Jio Fiber and Jio 5G Wireless might result in a greater increase in subscribers in the short- to medium-term," it stated in reference to the RIL and Star India joint venture.
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