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Reliance Industries Limited is an Indian multinational conglomerate company. It has diverse businesses including energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles. Reliance is one of the most profitable companies in India, the largest publicly traded company in India by market capitalization and the largest company in India as measured by revenue.

Investment Rationale

* Strong Capex Plans in Renewable Energy Space: RIL is expected to play a Major role for India’s Vision to become net zero carbon emission country by 2070. Company is working on investing Rs 75,000 crore over the next 3 years to build a new clean energy businesses, aimed at the company’s commitment to be net carbon neutral by 2035. Company is developing the Dhirubhai Ambani Green Energy Giga Complex on 5,000 acres in Jamnagar, the facility to include manufacturing units for solar cells and modules, a battery unit for energy storage, a fuel cell-making factory and an electrolyzers plant to produce green hydrogen.

* 5G Network execution to cement RJIO’s Positioning: in Recent 5G spectrum auction, RJIO acquired spectrums in the 700MHz, 800MHz, 1800MHz, 3300MHz and 26GHz bands in the auctions conducted by the Department of Telecommunications, Government of India. The acquisition of the right to use this spectrum to enable Jio to build advanced 5G network. Company has launched of beta trial of 5G services for Jio users in 4 cities including Mumbai, Delhi, Kolkata and Varanasi. Company is expecting Pan India rollout of 5G services by December 2023.

* Exploration Business back on Higher gas price Realization: Company s oil and gas price business recovered strongly in Q2FY23, Its EBITDA margins improved to 82.3% in Q2FY23 from 65% in Q2FY22. The geopolitical conflict between Russia and Ukraine and Europe refusing sourcing of gas from Russia led the gas price to record high which resulted in higher gas price realization for Reliance Industries. Further, European countries are now looking to save gas for winter which is currently undergoing and thus the price of LNG is expected to remain firm in near term

* Outlook and Valuations: We estimate a 10% CAGR in Topline over FY22-25E, which implies a forward PE (x) of 17.9 for FY 25E earnings. We value it with a earnings multiple of 20x to FY25 earnings estimate which results per share value of Rs 2873. We recommend BUY on RELIANCE at CMP of Rs. 2578 with Target price of Rs. 2873 (11%).

Technical View

* Reliance on the monthly timeframe have maintained its Higher High, Higher Low formation, pointing towards overall bullish undertone of the prices.

* RELIANCE has shown change in the polarity by the prices around the level of 2317, which shows rising bullish sentiment behind the prices.

* On the daily charts in the previous month we witnessed a Golden Crossover in the stock which strengthen the positive outlook of the stock.

* The RSI plotted on the weekly time frame have shown a breakout, indicating expanding bullish momentum in the prices.

* Going ahead we feel that the stock will move higher till 2850 followed by 3000.

* The stop loss for the setup would be 2400

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