Motilal Oswal sees 13% upside in Reliance Industries as company targets doubling EBITDA in 5 years

Reliance Industries stock forecast: Motilal Oswal has come out with a strong 'BUY' recommendation on Reliance Industries Limited as the brokerage house projects an upside of 13 per cent for the stock with an estimated target price of Rs 3,435. This bullish outlook comes after RIL's 47th AGM, in which the company's leadership announced an ambitious roadmap for the next five years-to double its EBITDA by fully capitalising on high-growth opportunities from its four core business segments: Telecom, Retail, Oil to Chemicals (O2C), and New Energy.

Strategic Vision: AI, 5G, and Data Centers

One of the major highlights of the just-concluded AGM was RIL's thrust on new technologies, more so in the field of AI and 5G. RJio, the telecom arm of the company, is targeting to double its revenue and EBITDA in the next 3-4 years. This growth is likely to be driven by the near-complete national rollout of 5G, of which RJio has about 85 per cent of the 5G radio cells in-country. The telecom giant has targeted home broadband services, aiming to scale its subscriber base from 30 million to 100 million, in tandem with expanding to small and medium businesses and educational institutions.

That too at a time when it is committed to AI to sell AI-based services at competitive prices to enterprises using its in-house AI platform, JioBrain. It is setting up GW-scale AI-ready data centres at Jamnagar and is all prepared to take up the pole position on AI infrastructure in India. These steps are bound to make the AI applications far easier and more affordable across different streams of agriculture, healthcare, and education.

Retail Growth: Omnichannel Strategy and Global Partnerships

Reliance Retail continues to be the other anchor for RIL, with the company aggressively expanding into physical stores and digital platforms. The company is planning to double revenue and EBITDA over the next couple of years through aggressive expansion in its footprint across grocery, fashion, electronics, and jewelry categories. Notably, strategic partnerships were signed between Reliance Retail and various international brands like Asos and Shein that would help the latter to introduce international fashion to its consumers in India. This business is likely to extend into even the expensive jewelry segment.

The catalyst for its growth so far is the different omnichannel model of Reliance Retail: both online and offline go together, with common inventory across platforms. Its wide store network, complemented by a strong supply chain, will position it well to capture emerging consumer demand in India's fast-growing retail market.

O2C and New Energy: Preparing for the Future

Accordingly, the company has chalked out massive expansions in O2C business to meet the increasing domestic demand for vinyl and polyester products. RIL is thus building integrated PVC and CPVC facilities at Dahej and Nagothane plants by FY27, coupled with speciality polyester and PTA capacity build-ups. These initiatives are expected to strengthen RIL's position in the global chemicals market and drive long-term growth.

However, the most ambitious part of RIL's strategy may well be its foray into the New Energy sector: operationalising 55 CBG plants by FY25 and commencing production of Solar PV modules by the end of the same year. Moreover, RIL is developing an advanced chemistry battery manufacturing facility at Jamnagar with a starting capacity of 30GWh, planned to start during 2HFY26. The firm aspires to achieve earnings from New Energy over the upcoming 5-7 years equal to its O2C segment.

Valuation and Future Prospects

Motilal Oswal's estimate for RIL factors in healthy growth over the next few years across business segments. It estimates the notional value of Reliance Retail at Rs 1,579 a share and RJio at Rs 940 a share, representing sizeable opportunities in retail and telecom. New Energy is estimated to be worth Rs 89 a share, factoring in the potential of this business to become a key growth driver well into the future.

Notwithstanding the weaker-than-expected Q1FY25 earnings performance, RIL is well-positioned for a bounce back in Q2FY25, driven by higher refining margins, telecom tariff hikes, and stronger retail earnings. The company remains well-placed to deliver structural long-term growth driven by aggressive expansion plans and strategic investments in new-age technologies.