Market Analysis: Understanding Reliance's 2.5% Share Gain Today

Reliance Industries Limited observed a significant increase in its stock price, emerging as the top gainer on benchmark indices with a gain of nearly 2.5%.

 At around 10:10 am, Reliance shares were trading up by 2.45% at Rs 2,953.45 per share on the Bombay Stock Exchange (BSE).

Goldman Sachs' Target Price Increase:

• Goldman Sachs, a brokerage firm, raised its target price for Reliance Industries Limited.
•    The firm's analysis suggests a potential increase of approximately 54% in Reliance shares.
•    In its bullish scenario for the financial year 2026, Goldman Sachs set a target price of Rs 4,495 per share for Reliance Industries Ltd.

Rating and Price Target Details:

•    Goldman Sachs maintains a 'Buy' rating on Reliance Industries in its base case scenario.
•     The firm revised its price target on the stock to Rs 3,400 from Rs 2,925, indicating a potential upside of 17% from the previous closing price.

Expected Value Enhancement:

•     Goldman Sachs views Reliance's risk-reward profile favorably.
•     Anticipates value enhancement from the Reliance-Disney joint venture.
•    Projects an expansion of Cash Return on Cash Invested (CROCI) by approximately 270 basis points to 12% by FY2027.

Outperformance Expectations:

•     Reliance Industries' shares are expected to outperform the Indian stock market under two scenarios: expansion in returns and valuation discovery facilitated by stake sales.
•     Foresees a rise in returns, potentially augmented by unlocking further value through potential listings of consumer businesses.
• Financial Projections:
•    The consolidated free cash flow of Reliance Industries is projected to turn positive in FY2025, accompanied by a 20% YoY expansion in EBITDA.
•  Expect a 17% compound annual growth rate (CAGR) in EBITDA over FY2024 to FY2027.
• Growth drivers include factors such as telecom tariff hike, increased retail segment sales, and recovery in chemical margins.

Strategic Investments and Ventures:

•    Reliance Industries, led by Mukesh Ambani, is strategically investing more in new ventures such as Retail and New Energy over the next three years.
•    These ventures are characterized as less capital expenditure-intensive with higher returns and shorter gestation periods.
• Retail Segment Growth:
•    Reliance Retail's EBITDA is projected to nearly double between FY2024 and FY2027.
•     The share of consolidated EBITDA is expected to increase to 14.3% in FY2027 from 12.4% in FY2023.

New Energy Vertical:

•    Positive EBITDA contribution from the New Energy vertical is anticipated to commence from FY2025.
•    Expected to reach $2.3 billion by FY2030 according to Goldman Sachs' projections.

Investment Advisory Disclaimer:

•     The views expressed in the report are those of Goldman Sachs and do not reflect the views of the Source.
•    It is advisable to consult a qualified broker or financial advisor before making any investment decisions.