Stocks

Broker's call: Reliance Ind (Buy)

| Updated on June 22, 2021

Motilal Oswal

Reliance Ind (Buy)

Target: ₹2,430

CMP: ₹2,226

FY21 has been a landmark year for Reliance Industries (RIL). The new-age retail and digital businesses flourished despite the Covid-led disruption, led by the emergence of RIL's disruptive and aggressive growth philosophy. As a result, this cushioned the impact on the overall business and provided the much needed capital raise and deleveraging. RIL’s fossil fuels business struggled with a 37 per cent decline in EBITDA in FY21. However, the retail business, partially supported by the online retail and digital businesses, came in much stronger, arresting the decline to just 9 per cent on a consolidated basis to ₹80,700 crore. RIL managed to raise ₹2.6 lakh crore in capital through an asset monetisation and rights issue.

Although, at the end of FY21, as per our calculation —gross debt for standalone was at ₹1,93,800 crore and consolidated was at ₹2,23,800 crore. We delve into the company's annual report, highlighting the key initiatives and business outlooks for the various segments. Using SOTP, we value the O2C business at FY23 EV/EBITDA of 7.5x, arriving at a valuation of ₹764/share for the standalone business, and add ₹68 for the E&P assets. We ascribe an equity valuation of a) ₹847/share to RJio on FY23 20x EV/EBITDA and ₹755/share to Reliance Retail on FY23 35x EV/EBITDA, factoring in the recent stake sale.

Published on June 23, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor