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  • ‘Reduce’ Reliance Industries: A vision and more disruptions

    Publish date: July 6, 2018

    Reliance Industries chairman Mukesh Ambani pressed forth the company’s achievements and ambitions during the 41st AGM.

    Reliance Jio’s exponential growth, announcement of ultra-high speed internet JioGigaFibre and the company’s digital future dominated Ambani’s keynote speech to the shareholders.

    Key Highlights

    • Part of strategic transition, the company’s chairman sounded out plans to reinvent itself as a technology platform company. Ambani said that they intended to build a “hybrid online-to-offline new commerce platform…(because) digital platforms have become the new-age factories”.
    • The chairman also announced setting up of new consumer businesses to boost the company’s profitability.
    • Jio’s subscriber base has touched 215 million, including 25 million Jio phone users. The company wants to amplify the number further by allowing people to exchange their existing feature phones with Jio phones for Rs 501. They expect there will be a 100 million Jio phone users in a short span of time. In total, the subscription base may swell to 380 million by 2021. Our assumptions are that the company’s EBITDA earning will be around Rs.361 billion with 57% margins.
    • The company has pinned its hopes on JioGigaFibre, a fibre-based broadband service, to usher in a “smart green revolution” in the country. Around 50 million households across 1,100 cities will benefit from the high-speed, high data internet service. The broadband service will come with a set-top box for TV sets.
    • JioPhone 2, priced at Rs. 2,999, is likely to be launched on August 15.
    • Ambani also stated they were looking for new ways to increase profitability in their energy and petchem business. The DTA gasification complex has stabilized faster than usual, while the PX units and ROGC in Jamnagar are operating higher than their design capacity.
    • With the energy business shifting from fossil fuels to renewables, Ambani said it was looking to install new chemical chains and build capacity to produce high-value composites.

    Valuation & outlook

    We urge caution in this case, despite the company placing outsized bets on consumer-end platforms. That’s because Reliance Industries currently gets 80% of its revenue from refining and petrochemicals, and we have previously highlighted weaknesses in regional refining and the petchem business — evidenced by the weak showings of its Singapore complex and key polymers business. You can get our full analysis by clicking on the ‘Full Report’ icon.


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