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Motilal Oswal Report
Motilla Oswal reiterates its Buy rating on Reliance Industries Ltd. with a revised target price of Rs 1,655 (earlier Rs 1,715), and sees a potential upside of 25% from the current market price.
The brokerage highlights that while the energy business weakness drives the near-term earnings downgrade, sustained mid-to-high teen growth in Reliance Retail and a tariff hike, along with impending JPL IPO, remain the key triggers for RIL's stock price.
FY26 performance summary:
- RIL's consolidated Ebitda grew 8% YoY to Rs 1,78,900 crore, while adjusted attributable PAT grew by a modest ~3% YoY to Rs 71, 900 crore, due to higher interest and depreciation expenses.
- FY26 committed capex increased ~10% YoY to Rs 1,44,300 crore, while cash capex moderated ~12% YoY to Rs 1,22,900 crore (~20% YoY lower RJio capex).
- Calculated debt (including spectrum liabilities and creditors for capex etc.) inched up by ~Rs 5,800 crore in FY26 to Rs 2,81,800 crore, on brokerage's estimates.
- Consolidated free cash flow for FY26 improved to Rs 40,600 crore (vs Rs 66,000 crore), boosted by Asian Paints stake sale. Even excluding other/interest income, RIL's consolidated FCF improved to ~Rs 18,00 crore (vs outflow of Rs 98,000 crore YoY), driven by improvement in RJio's FCF generation (Rs 21,300 crore vs Rs 3,900 YoY).
Motilal Oswal has cut its FY27E Ebitda and PAT by 3-4% due to the challenges in the energy business and delays in tariff hikes in RJio.
Overall, build in a CAGR of 9-10% in RIL's consolidated Ebidta/adjusted PAT over FY26-28E.
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ALSO READ: Reliance Industries' Shares Trade Under Pressure After Soft Q4 Results
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