Target: ₹1,570
CMP: ₹1,387.65
The FY25 annual report of Reliance Industries (RIL) highlights some interesting data points: No let-up in capex intensity, despite expectation of some moderation (cash capex of ₹1.4 lakh crore in FY25, marginal ₹10,000 crore reduction year on year; net debt (including spectrum and other deferred payment liabilities) remained flattish at ₹3.03 lakh crore, despite a material ₹1.79 lakh crore in OpCF in the year; net working capital (excluding cash and investment) fell ₹37,800 crore (over FY24), driven by a sharp uptick in other current liabilities; FCF generation improved somewhat, at +1.8 per cent for the year vs -0.6 per cent average over FY18-24; and complete transformation of the earnings profile, with 4,300-bps reduction in OTC share of EBIT, offset by 2,000-bps jump in digital services share and 400-bps jump in retail share.
We had tweaked our earnings estimates marginally to factor in stronger numbers from both retail and telecoms in our post-Q1FY26 result note. At our revised estimates, we still see consolidated EPS CAGR at a material 14.1 per cent over FY26-28E, with a lower 11.8 per cent CAGR in EBITDA.
We believe RIL may continue to outperform, depending on the successful unlocking of value from retail/digital services segments, with core business cashflow conversion, return ratios and relatively higher multiples limiting gains as of now. Reiterate Add with TP of ₹1,570, implying about13 per cent upside from CMP.