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Global brokerage firm Bernstein has maintained an ‘Outperform’ rating on the Nifty 50 heavyweight, with a revised price target of ₹3,440, up from ₹3,190 earlier, citing the growth engine led by Reliance Jio.
The price target was driven by the higher valuation of Reliance Jio following recent tariff hikes, which were ahead of earlier expectations.
Bernstein has also raised the target multiple for Jio’s business. Reliance Jio continues to focus on monetisation with a recent tariff hike and the completion of its 5G rollout.
The brokerage expects a 16% compound annual growth rate (CAGR) in revenue and a 20% CAGR in EBITDA for Jio over the next three years, with the benefits of the tariff hike reflecting in the financial year 2025.
Market share gains are expected to continue, as Jio reaches 500 million subscribers and 47% revenue share by FY25.
CLSA wrote in its note that Jio’s 5G rollout led to a 46% year-on-year jump in capital expenditure, which reduced its free cash despite a 15% year-on-year rise in operating cash flow.
Much of this capex was added to capital work in progress (CWIP), which led to a notable year-on-year increase in capitalised interest and a 60 basis points decline in return on capital employed (ROCE).
Encouragingly, Jio’s rate of depreciation is now more comparable to listed telecom peers while its network costs remain notably higher than peers, the brokerage highlighted.
The next leg of growth is expected to come from 5G monetisation and broadband ramp-up.
CLSA has an ‘Outperform’ recommendation on Reliance Industries with a price target of ₹3,300 per share.
Out of the 36 analysts that have coverage on Reliance Industries, 25 of them have a ‘Buy’ recommendation, eight say ‘Hold’, while three of them have a ‘Sell’ rating on the Nifty 50 heavyweight.
Shares of Reliance Industries are currently trading 0.86% higher at ₹3,022, and have risen 17% so far in 2024.
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