Mumbai: Reliance Industries (RIL), India’s most valuable company, soared to an all-time high of ₹2,788.80 on Thursday on optimism over strong growth in its various businesses. The stock has surged 8.6% in last four trading sessions, bucking the roller coaster ride in the benchmark indices and analysts expect the outperformance to continue in the near-term.
“RIL has outperformed the broader indices in the last one month on improving earnings outlook across its business segments,” said Abhijeet Bora, analyst, Sharekhan. “Strong cashflows from the standalone business would help fund capex for its new energy business and potential monetisation of gasification unit through induction of strategic investors to help unlock value.”
Morgan Stanley on Wednesday raised its price target on Reliance shares to ₹3,253 from ₹2,926 citing a likely earnings upgrade cycle.
The stock went through a period of consolidation between September 2020 and March 2022. Reliance shares have risen just 22% during this period compared to a 52% rally in the Nifty index.
However, in the last one month, the stock surged nearly 13% compared to a flat Nifty.
“Several factors are playing out in favour of Reliance, which is why the stock has gone up even in an uncertain market like this,” said A K Prabhakar, head of research at IDBI Capital. “Gross refining margins have shot up, gas prices have strengthened, while there is a lot of optimism about its hydrogen energy business.”
Varun Saboo, director-institutional equities at Prabhudas Lilladher, expects 10-15% returns in the near term, with three of its main businesses doing exceptionally well.
Analysts said Reliance is aggressively rolling out the new energy business.
We believe the share price implies near-zero value for the new energy business and no upside from NAV accretion in the traditional energy business, especially as it funds the next investment cycle,” said the brokerage. “RIL remains well funded for new energy investments, and unlike in past cycles will see net debt remaining rangebound.”
Traders have mounted bullish derivatives bets on Reliance in the wake of the surge in its stock price. Analysts said if it manages to cross ₹2,800 level, it could touch ₹2,900 by month end.
“Reliance witnessed addition of 42.11 lakh shares with a price gain of 5.50%, indicating long build in April expiry with a total open interest of 3.52 crore shares,” said Rajesh Palviya, head-technical & derivatives, Axis Securities. “Currently, the highest OI (open interest) concentration on the Call side is seen at 2,900 and 3,000 strikes; while on the Put side, it’s at 2,700 strike, which is likely to act as strong support.”
