Buy Reliance Industries; target of Rs 1,555: PL Capital
PL Capital's research report on Reliance Industries
The company highlighted how it has crossed 500mn customers and has emerged as the world’s largest wireless data carrier. The next leg of growth is expected from building simple, scalable and secure platforms for MSMEs and enterprises. In addition to the earlier announced Jio AI Cloud, the company announced two new features this AGM- Jio PC and Jio Frames. The first enables converting any TV or screen into AI-ready computer by plugging a keyboard into Jio Set-Top Box. The latter is an AI powered wearable platform and ecosystem and enables clicking photos and recording videos. It aims to list Jio in H1CY26 subject to necessary approvals.
Outlook
The company has successfully demonstrated its ability to execute large scale unrelated diversifications through its foray into retail as well as digital services in the past. Since 2021, it has been working on its New Energy segment where it has also partnered with several technology companies. In absence of further details, we have valued its New Energy segment at 2x its stated capex of Rs 750bn, valuing it at Rs111/share. However, New Energy segment faces 1) overcapacity and ability of the Chinese to crash prices, 2) rapid changes in technologies, 3) tight control of Chinese over the supply-chain, and 4) lack of ecosystem in the country. We have also highlighted in our thematic note the difficulties faced by non-Chinese companies in this segment, which has seen ten large size bankruptcies in 2024 alone. We use SOTP to value the company at Rs 1,555 (unchanged). The stock has corrected by 7% since our last note. Due to the same, we upgrade the stock to BUY from Accumulate.
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