In the last article, I discussed a sector that I am avoiding and the reasoning behind it with market analysis. In this article, I will discuss a stock that might provide a good return in near future and will also try to explain the rationale behind it.
Reliance Industries is the largest private sector company in India. It is involved in a wide array of products ranging from energy, telecom, retail, textiles, digital services, and a lot more. Currently managed by Mukesh Dhirubhai Ambani, the Ambani family holds around 50% shareholding in the company.
Explaining the business of Reliance Industries
RIL accounts for approximately 27% of all the crude oil refined in India and it exports more than 50% of all the oil it refines. It also has a network of more than 1400 fuel stations all over India. The refining business accounts for around 50% of RIL's revenue.
Reliance also operates around 12,000 retail stores in India with over 10 crores of registered customers. It is the largest retailer in India in terms of profits generated. In 2020, RIL raised 47,250 crores for its retail business. Popular brands like Emporio Armani, Diesel, and Tiffany are a part of Reliance's retail business. Retail provides 21% of the revenue of Reliance Industries.
Jio Telecom is the most profitable business for Reliance Industries. Jio accounts for around 10% of the revenue of the conglomerate. Starting in 2016, Jio has a 35% market share in the telecom industry of India. Jio's business model has been able to attract tech giants like Google, Facebook, and Qualcomm as investors.
Apart from these, Reliance Industries is also involved in various other businesses.
Is it a good time to invest in Reliance Industries?
At the moment of drafting this article, RIL is trading at the price of ₹2406. And the business is consistently increasing its revenue and net income every year. In 2020, its net income stood at 39000 crore INR. And since then the net income has grown by 53% to 61000 crore INR in 2022. Over the last 5 years, revenue has grown at a yearly rate of 18% against an industry average of 13%.
Bernstein Research believes that Jio's profit margins are going to increase due to the tariff hikes. And the revenue from the retail business is expected to grow by 30% this year. Moreover, it is predicted that Reliance's retail network might increase from the existing 12,000 stores to around 15,000. With the Government of India looking to buy Russian oil at a cheaper price, the profit margins for the oil business are estimated to grow by 60%.
All these factors provide an insight that the stock price of Reliance Industries might go up from the current listing of ₹2406 per share to ₹3360. This is an increase of almost 40%.
This is just an informative article from my personal point of view and not a piece of investment advice. do keep in mind that we are in unstable times with the ongoing Russia-Ukraine war, high inflation, supply chain disruption, and a risk of a recession looming. Hence, do your due diligence before investing.
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