JP Morgan Upgrades Reliance Stock to 'Overweight' with Target Price of Rs 3,170

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Reliance upgrade

The NIFTY50 has fallen nearly 11% YTD (Year-to-Date). On the other hand, Reliance Industries, NIFTY50 overweight, has given 8.5% returns to its investors in the same period. What are the reasons behind it, and what are the prospects for the company? Let us look at everything in this blog.

Reliance Industries to benefit from rapid modernization

Analysts at Bank of America Securities, in their recent reports, have highlighted stocks that they believe will bode well for the years to come with their fundamentals and offers. BofA analysts' have picked 50 stocks across the globe that will benefit from the changing world scenario. India's population is set to overtake that of China and supply chains are reshaping. Based on this, there are only two Indian companies - Reliance and Zomato.

As per the brokerage firm, Reliance, as a telco and online apps provider, is the biggest retailer and one of the largest content providers, with unparalleled access to India’s consumer patterns. It makes reliance uniquely positioned to leverage and monetize this to ad revenues/ push its products & services in a customized manner. As per the firm, the company's digital opportunity has the potential to drive incremental revenues from New-commerce, Ad revenues, and the App ecosystem.

IPL Digital rights

Reliance Industries-controlled Viacom18 recently bought the digital media rights for Indian Premier League (IPL) matches in the Indian subcontinent from 2023 to 2027. The company has also won the rights to a special package of 18 games every season. Apart from these, it has television and digital rights for three out of five international territories.

The company has said that with these IPL rights, Viacom18 will be able to take India's biggest sporting event to every nook and corner of the country. With more viewership comes more revenue for the company. 

Cheaper oil imports

As per the latest data available, Reliance imported about 1.4 million barrels per day of oil in May, up 9.1% from April. The Middle East's share of Reliance's imports declined to 61% from 67% in April, while from CIS countries which includes Russia, the import increased from 13% to 23%. Russia is offering oil to Reliance at a discounted rate which is going to affect the company's margins in the coming quarters in a positive way.

Bid for UK pharmacy chain Boots

Reliance Industries has inched closer to acquiring UK pharmacy chain Boots, controlled by Walgreens Boots Alliance. As per reports, the company has made a binding offer for the drugstore chain. The offer has valued the company at $6.3 billion.  

If the deal happens, it will be the largest cross-border acquisition by Reliance. The consortium was in talks with global financial biggies to fund the deal. The deal will help Reliance expand its presence in the country, a market that has been his recent favorite with the previous acquisition of Hamleys in 2019, and battery technology firm Faradion in 2021. Boots currently has 2,200 stores and over 50,000 employees.

Reliance Brands becomes the official retailer of Italian luxury

Last month, Reliance Brands Ltd, the brand licensing arm of Reliance Industries Ltd, entered into a "long-term franchise agreement" with Italian luxury icon Tod's S.p.A to retail the brand in India. Tod's has been operational in India since 2008 with mono-brand stores in DLF Emporio, New Delhi and Palladium, Mumbai, and multi-brand e-commerce platform Ajio Luxe.

Brokerage Radar

JP Morgan: The brokerage firm has upgraded its rating to OVERWEIGHT from neutral with a target price of Rs 3170 from Rs 2575 over the next 12 months. As per the firm, the rating upgrade is driven by improvement in the earnings outlook of the refining and upstream gas business as well as the consumer technology businesses’ valuations holding. It has raised its earnings per share estimate by 19% for 2022-23 and 17% for 2023-24.

BofA Securities: The firm said that RIL has a suite of consumer-facing apps and investments in multiple startups/digital spaces across segments in its recent report. This is going to help the company in the coming years. It has set a target price of Rs 2917 per share for the company.

Reliance is trading at Rs 2,594, down 0.046% on Thursday afternoon