RIL shares down over 7% in 1 year, Macquarie gives Rs 1,580 target price
ADVERTISEMENT The firm has maintained an 'Outperform' rating, citing multiple growth levers, a reset in earnings expectations post-June quarter, and potential reinvigoration in the company's retail segment.
Macquarie now forecasts a 10–12% compound annual growth in earnings per share (EPSg) for FY25–28e, with earnings estimates trimmed post the Q1 results. The revised estimates are 5–8% below Visible Alpha (VA) consensus for FY26–28e.
Nonetheless, the brokerage remains positive on RIL's prospects, calling it one of its "Super 6" best ideas and expects improving fundamentals to support a re-rating in the stock.Macquarie projects Reliance's EBITDA for FY27–28 at $10–11.5 billion, supported by 200–300 basis points in margin improvement. However, it notes that EBIT may still lag due to higher depreciation and amortization.
ADVERTISEMENT In the Jio segment, subscriber growth is estimated at 2% with ARPU growth of 8–10% annually, slightly above consensus, though EBIT is expected to be weighed down by elevated depreciation.In Retail, revenue forecasts have been trimmed, with Macquarie now expecting a 13% CAGR in FY25–28. EBIT margins, however, are seen improving by around 100 basis points, assuming no losses from Jiomart, as the business leverages its existing footprint. The firm sees only modest growth in retail due to limited visibility but notes that improved productivity per square foot and store additions remain key upside triggers.
ADVERTISEMENT In Oil to Chemicals (O2C), Macquarie has made no material changes, maintaining its existing recovery outlook. For Exploration & Production (E&P), EBIT forecasts have been sharply cut, particularly for KGD6, due to higher opex and revised volume assumptions.
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The brokerage has also increased its capex forecasts, anticipating higher spend in the New Energy segment, which is one of the company's long-term focus areas.
ADVERTISEMENT Macquarie's target price is based on a scenario-weighted sum-of-the-parts (SOTP) valuation model, with adjustments made in Retail, Media, and New Energy segment weightings. Key catalysts for RIL's stock performance include: Strategic direction and growth targets at the upcoming AGM,
Recovery in retail revenue,
Commissioning of new energy capacities,
Progress toward the listing of Jio.
Despite the lowered earnings estimates relative to consensus, Macquarie believes the current environment provides a tactical opportunity to accumulate the stock ahead of a potential improvement in earnings momentum and positive triggers from upcoming corporate events.
ADVERTISEMENT The key downside risks highlighted by Macquarie include a failure in earnings delivery, slower-than-expected retail revenue growth, and delayed or muted impact of Jio tariff adjustments. However, the firm remains constructive on the long-term outlook, banking on multiple growth levers across segments.
Around 1:30 pm today, the shares of Reliance Industries were trading flat at Rs 1,395.95 on the BSE.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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