Mukesh Ambani’s Reliance Indusrries Ltd (RIL) is set to hold its 44th Annual General Meeting virtually. The slew of announcement of Jio Laptop, JioPhone 3, 5G plans, update on Saudi-Aramco deal, are expected from Mukesh Ambani’s speech at 2 PM today.
While India’s most valuable company is expected to give a glimpse of its 5G plan by listing out its digital unit. They share a view of a cheaper smartphone being developed with Google. So, all eyes will be on RIL’s meet today where we can see the glimpse of the company in the coming years and the future of networking in India.
According to the reports of money control-
RIL’s consolidated earnings are set to register a 17 percent per annum growth through FY21-23ii – on the back of –
1) recovery in the O2C business: cyclical recovery in gross refining margin (GRMs) aided by pick up in consumption across the globe clubbed with strength in petchem deltas;
2) 34 percent growth in Jio’s EBITDA (earnings before interest, tax, depreciation and amortisation) (10 percent per annum growth in ARPU assumed);
3) 26 percent per annum growth in EBITDA of Reliance Retail, as we build in 14 percent per annum growth in the area under operations and improving revenue and profit margins.
The earnings growth has an upside, provided the GRM (gross refining margin) improvement is ahead of estimate and recovery in retail sales growth is sharper. For a $1 per barrel change in GRMs, the earnings swing by 6 percent, while a 10 percent change in sales growth for Retail causes a consolidated PAT change of 2 percent.
In the base case, we value RIL at Rs 2,200 per share, near the CMP (current market price), but the stock can offer significant upsides with the following events:
1) value unlocking in the O2C segment (induction of strategic investor);
2) successful consummation of Future Retail’s business which as of now is under litigation.
