On Tuesday, HSBC updated its stance on Reliance Industries (RIL:IN), increasing its price target to INR2,770 from INR2,600, while maintaining a Hold rating on the stock. The adjustment reflects a revised valuation approach and expectations for the company's performance.
The analyst at HSBC noted that the earnings per share (EPS) estimates for the fiscal years 2025 and 2026 have been slightly reduced by 2-3%. This revision is primarily due to anticipated lower retail income in the short term and a slower pace of reduction in capital expenditures. Despite these adjustments, the long-term outlook remains positive, with retail investments expected to generate returns and contribute to sustained growth over the medium term.
The valuation method has been rolled forward to the end of fiscal year 2025, and a nine-month discount has been applied to determine the fair value as of June 2024. This methodology change underpins the 6% increase in the target price for Reliance Industries.
Reliance Industries, a conglomerate with a diverse portfolio including energy, petrochemicals, natural gas, retail, telecommunications, and textiles, is poised to navigate through the near-term challenges in its retail segment. The company's strategic investments are anticipated to bear fruit, driving growth beyond the immediate fiscal years.
HSBC's updated price target for Reliance Industries at INR2,770 is indicative of the firm's careful consideration of the company's financial prospects and investment strategies. The Hold rating suggests that while the stock is expected to perform steadily, investors may await further signs of growth before considering a more aggressive investment stance.
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