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JM Financial has reiterated a buy with a target price of Rs 2,500 as Reliance Industries Limited (RIL) is entering a strong free cash flow generation phase with major capex completed and expectation of strong 17-18 per cent EPS CAGR over the next 3-5 years led by Digital and Retail businesses.

JM Financial said in a report that Jio's subscriber momentum could be bottoming out, given its aggressive strategy to acquire significant quantities of capacity spectrum to regain subscriber momentum via its new Jio Phone offers and impending launch of the low cost smartphones.

Further, near-term delay in tariff hike does not derail the long term structural uptrend story in ARPU, as any consolidation scenario could further boost Jio's subscriber's addition. "We believe that Jio's significant focus on subscriber addition is due to the fact that it could enable it to cross-sell and up-sell digital opportunities to its subscriber base in the long term. However, markets may await for more traction on digital services," JM Financial said.

In the retail business, RIL is driving omni-channel capabilities across segments as well as extending JioMart to Consumer Electronics and Fashion & Lifestyle, this has potential to become a sizeable value-creation opportunity, the report said.

Though downstream margin outlook continues to be subdued, recovery in crude price has improved visibility of strategic stake sale in RIL's O2C business, which could help put a floor to valuations.

"We re-iterate BUY (TP of INR 2,500) as RIL is entering a strong FCF generation phase with major capex completed and expectation of strong 17-18% EPS CAGR over the next 3-5 years led by Digital and Retail businesses," the report said.