Brokerages Remain Bullish as Reliance Industries Aims to Double EBITDA with Expansions in O2C, Retail, and New Energy

Reliance Industries Aims to Double EBITDA

Reliance Industries Ltd (RIL) recently unveiled its ambitious plans to double the conglomerate’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) over the next five years. This strategic direction, outlined at the company’s 47th Annual General Meeting, has significantly buoyed investor sentiment, with several brokerages maintaining a bullish outlook on RIL’s future.

Key Drivers for Doubling EBITDA by 2030

Under the leadership of Mukesh Ambani, Reliance Industries is set to drive growth through expansions in its oil-to-chemicals (O2C) business, an aggressive push in digital and retail sectors, and a strong focus on new energy ventures. These initiatives are expected to propel the company towards its goal of doubling EBITDA by 2030.

Reliance Retail’s Growth Trajectory

Reliance Retail, one of RIL’s consumer-centric businesses, continues to show robust performance with double-digit EBITDA growth. According to brokerage firm Motilal Oswal, Reliance Jio and Reliance Retail are projected to achieve an EBITDA CAGR (Compound Annual Growth Rate) of 25% and 19% over FY24-26, respectively. This growth is driven by the expansion of retail footprints, introduction of new categories, a focused approach to subscriber growth, and anticipated tariff hikes in the telecom sector.

Reliance Jio’s Expansion in Telecom and Digital Services

Jefferies highlighted the significant focus on Reliance Jio during the AGM, particularly in its traction in Airfiber and entry into data centers. Despite Reliance Jio comprising 8% of the global data market, its data pricing remains highly competitive, being only a fraction of the global average. With over 130 million 5G users and a vast addressable market, Reliance Jio’s growth is expected to continue as more consumers upgrade to 5G-compatible devices.

New Energy Ventures and O2C Expansion

Mukesh Ambani also announced ambitious plans for RIL’s New Energy business, projecting it to match the profitability of the current O2C segment within the next 5-7 years. The O2C segment, which currently contributes two-fifths of RIL’s EBITDA, is set to benefit from a significant investment of Rs 75,000 crore in developing a comprehensive ecosystem for the new energy economy.

International brokerage CLSA noted that RIL’s prioritization of investments across O2C and New Energy sectors underscores its commitment to maintaining profitability and achieving net-zero carbon emissions by 2035. Additionally, the upcoming full ramp-up of the MJ Field in FY25 is expected to further bolster RIL’s refining and petrochemicals segments.

Positive Outlook and Potential Upside

Brokerages remain optimistic about Reliance Industries’ growth prospects. Emkay Global predicts a potential upside of 15-20% over its target share price of Rs 3,335, contingent on flawless execution and adherence to timelines. Meanwhile, Nuvama has retained its buy call, highlighting that the New Energy rollout could significantly enhance profits and re-rate valuations, particularly in the O2C segment.

Nomura also emphasized that RIL’s EBITDA CAGR will be further bolstered by a sharp increase in free cash flow (FCF) generation and a notable reduction in net debt levels, reinforcing the company’s financial strength and stability.

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