Jefferies bullish on Reliance Industries

Reliance Industries Limited
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Foreign brokerage Jefferies has a bull case target of Rs 3,500 and bear case target of Rs 2,200 on Reliance Industries (RIL). In a report, Jefferies said RIL would replace gray H2 with green at its refineries and could monetise the captive green H2 production by moving it into an InvIT and inducting investors. The firm said EU and India’s 2030 green hydrogen (H2) targets translate into a $74 billion total addressable market (TAM) for RIL’s electrolyzer manufacturing business.

The foreign brokerage values RIL’s electrolyzer manufacturing business at a 20 per cent discount to the European benchmark and added the cap value of its captive H2 consumption.  “We discount its FY30E fair value at 12 per cent WACC to get a June 2023E FV of $8 billion. Any meaningful capital subsidy from the govt would aid the valuation of its green hydrogen foray,” the foreign brokerage said.

The brokerage has a base case target of Rs 3,100 on the stock. The base case estimates 24 percent Ebitda CAGR in Jio over FY22-25E, 35 per cent Ebitda CAGR in retail over FY22-25, 11 per cent Ebitda CAGR in refining over FY22-25 and 4 per cent Ebitda CAGR in petchem over FY22-25E.

Jefferies’ upside scenario anticipates recovery in GRMs ahead of estimates; faster consolidation in telecom leading to tariff upside in Jio, possible public listing of Jio re-rating valuation multiples; Reliance Retail gaining market share faster than expected and Jiomart GMV coming in ahead of expectations.

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