Can the stock of Reliance Industries Limited give 50% returns in the next year? And what are the factors that support the statement? Read more about this in the blog.
The Investment Bank Jefferies Group has seen a 50% upside for the stock of Reliance Industries Limited in the next year. So let’s understand the thought process behind the prediction and the points that are put ahead by the firm.
What are the reasons laid down by Jefferies?
1. Aramco Deal:
- Aramco is the world’s largest player in the oil business and it has tied hands with Reliance for their O2C business.
- Being a major cash producer for RIL Ltd., the oil business can provide immense growth to the overall group.
2. Recovery in Gross Refining Margins:
- The prices of crude oil have shown sluggishness in the recent past but it is now seen to be recovering.
- This rise in the prices of crude oil will improve the margins of the company.
3. Faster Consolidation in Telecom:
- The sales of VI limited has shown a fall in the quarter on quarter basis and the company also posted a loss of over Rs. 7,000 Crore.
- Whereas the customer base of Jio has shown a rise on quarter on quarter basis. The customers are moving from VI to Jio and Airtel.
- There can be a duopoly situation of Jio and Airtel in the Telecom Sector and will bring opportunities for Jio to raise its tariffs according to the demand.
4. Possible listings in the Market:
- Reliance Industries Limited can list Jio in the market which can unlock huge potential in terms of market funding.
- RIL can also list Reliance Retail in the stock market. These two are the growth engines for the company.
5. Faster than expected market share gain in Reliance Retail:
- 88% of the total retail in India belongs to the unorganized sector.
- Only 9% of the players are organized and offline whereas the rest i.e., 3% is under online business or E-Retail.
- Reliance Retail is also looking to target the local Kirana stores to gain more market share.
All the factors that are mentioned by Jefferies are correct up to some extent but seeing a 50% upside for the stock in the next year can be a bit challenging and highly optimistic. One should analyze the business thoroughly and then only should invest. Do consult a financial advisor before making any investment strategy.