Stock Market

Reliance share price rises after Goldman Sachs raises target price on stock, sees 54% upside potential

Reliance share price gained over a percent in early trade on Wednesday after foreign brokerage firm Goldman Sachs raised the target price on the stock. The brokerage firm estimates Reliance shares to see a potential upside of around 54%.

In its bull case scenario financial year 2026, the brokerage house has a target price of 4,495 per share for Reliance Industries Ltd. (RIL), a report said.

In its base case, Goldman Sachs has maintained a ‘Buy’ rating on energy-to-telecom conglomerate Reliance Industries and raised the price target on the stock to 3,400 from 2,925 earlier, implying a potential upside of 17% from Tuesday’s closing price, reported CNBC-TV18.

Goldman Sachs finds Reliance’s risk-reward to be favourable and sees value accretion from the Reliance-Disney JV. The company’s Cash Return on Cash Invested (CROCI) is expected to expand by nearly 270 basis points (bps) to 12% in FY2027.

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According to Goldman Sachs, Reliance shares tend to outperform the Indian market during two scenarios: expanding returns and valuation discovery through stake sale in newer businesses. The brokerage expects rising returns ahead which could compound with further potential value unlock through potential listings of consumer businesses, the report said.

Goldman Sachs expects Reliance Industries’ consolidated free cash flow to turn positive in FY2025, while EBITDA to expand by 20% year-on-year (YoY) led by a telecom tariff hike, higher retail same-store sales growth and a recovery in chemical margins.

It expects a 17% EBITDA CAGR between FY2024 – FY2027 driven by retail EBITDA nearly doubling during this period; a 22% EBITDA CAGR in the telecom business, driven by higher telecom ARPU; the continued shift of consumers to smartphones and strong traction in fixed broadband; petchem margin recovery and sustained strength in diesel cracks due, the report added.

The brokerage firm believes the new businesses that the Mukesh Ambani-led Reliance Industries is investing more in the next three years (Retail and New Energy) are less capex-heavy and higher in returns with a shorter gestation period, the report said.

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Moreover, Reliance Retail’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is estimated to nearly double between FY2024 – FY2027 with the share of consolidated EBITDA increasing to 14.3% in FY2027 from 12.4% in FY2023.

For the New Energy vertical, Goldman Sachs expects positive EBITDA contribution to begin from FY2025 and reach $2.3 billion by FY2030, the report added.

Reliance share price has gained over 11% in the past three months, while the stock is up more than 30% in one year.

At 9:18 am, Reliance shares were trading 0.97% higher at 2,912.00 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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