Fundamental Radar: 4 factors why RIL is a strong buy at current levels

Reliance Industries, India’s largest company by market capitalisation, rallied more than 10% from its September 2022 low and with strong growth seen across verticals, experts believe the stock is poised to scale fresh record highs in the next 12 months.

The refining margins remain strong for this oil & gas major due to the EU sanctions on Russian oil products from February 23. The company has recorded strong profitability from the gas segment due to higher volume, and retail profitability is also improving, suggest experts.

The stocks rose over 2% in a week and more than 7% in a month.

In terms of price action, the stock is trading above the crucial short- and long-term moving averages of 5,10,30,50,100 and 200-DMA which is a positive sign for the bulls.

Vikram Kasat – Head Advisory, Prabhudas Lilladher highlights four factors why RIL could hit fresh highs in next 12 months:

1) E&P- Higher volume, realisation drive earnings
In Q2, the average JV gas production was at 19 mmscmd (+1%QoQ). Gas volumes will increase gradually to 30 mmscmd in FY24 when the MJ field starts production with the capacity to be brought online by CY22 end.

Q2 gas realization has been steady at $9.9. Oil and gas EBIDTA was at Rs 31.6 bn (+16%QoQ). CBM realisation was at $23.3/mmbtu and volume was at 0.76 mmscmd.

2) Jio Platform
Another healthy performance. Jio's EBIDTA in Q2 was at Rs 114.9bn (+4.7% QoQ) as ARPU was at Rs 177.2 (+0.9% QoQ). Subscriber addition was robust at 7.7mn (overall 427.6mn subscribers) post-sim consolidation.

3) Retail earnings
Recovery gains momentum: Retail profitability improved, as stores operated normally. In Q2, 795 new stores (792 in Q1) opened with retail EBIDTA of Rs 42.9bn (+10% QoQ) led by strong growth in fashion, grocery and electronics.

We believe entry into futuristic technology and new platforms will continue to power growth in coming years

4) Global Economic Activity
All round recovery in global economic activity augurs well for all of RIL’s business segments and we believe that the company is well-positioned to incubate new business and pursue inorganic opportunities.

We maintain a ‘BUY’ call with a target price of Rs 2,892 (Rs 3,140) as we roll over the O2C segment to FY24.

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