Reliance Industries shares at Rs 4,495? Here’s why Goldman Sachs sees up to 54% potential upside

The overseas brokerage firm is bullish on companies’ risk-reward dynamics, business tailwinds, value unlocking, better capex allocation.

RIL has invested over $125 billion in capex in the last 10 years, mostly in hydrocarbon and telecom, which are more capex intensive and have a longer gestation period, said Goldman Sachs. “While the capex cycle for hydrocarbons and telecom 4G completed during FY17-19, we saw an accelerated telecom capex cycle in 5G, which is now completing in FY24,” it said.

Goldman believes that the businesses RIL is investing more in the next 3 years are relatively less capex heavy, higher in returns and have a shorter gestation period. RIL shares tend to outperform the India market during two scenarios- expanding returns and valuation discovery through stake sale in newer businesses, it said.

Shares of Reliance Industries (RIL) surged more than 2.5 per cent during the trading session on Wednesday to Rs 2957.50 for the day. The company briefly reclaimed the market capitalization of Rs 20 lakh crore for the day. However, the stock had settled at Rs 2,884.15 in the previous trading session.

“Over the last two years, both these drivers were largely absent, potentially driving the shares’ underperformance. We expect rising returns ahead (101/75/92 bps CROCI expansion in FY25E/26E/27E) which could compound with further potential value unlock through potential,” the brokerage added.

We expect rising returns ahead (101/75/92 bps CROCI expansion in FY25E/26E/27E) due to capex decline alongside a 17 per cent Ebitda CAGR, 6-10 per cent above Bloomberg consensus, mostly driven by oil to chemical business due to bullish diesel views driving higher for longer GRMs and bearish gas views leading to petchem cost curve advantages, said Goldman.

Shares of Reliance Industries have remained flat in the last one month period, while the stock has gained about 15 per cent in the year 2024 so far. The stock is up 25 per cent in the last six months and 32 per cent in the last one year.

“We continue to value RIL on a SOTP basis but roll forward from September 2025 to March 2026. We revise our valuation methodology for offline retail business from DCF to EV/Ebitda multiple of 33 times as the business has achieved steady-state EBITDA margins, and the pace of expansion is likely to moderate to normalized levels,” it said.

“We also factor in value accretion from the Reliance-Disney JV. We continue to use 8 times FY26E EV/Ebitda to value the core refining and petrochem business, and we use DCF to value the high growth TMT business. We raise our 12-month SOTP-based target prices for RIL by 16 per cent to Rs 3,400,” Goldman added. In the bull case, it has target price of Rs 4,495, suggesting an upside of 54%.

Reliance Industries and Walt Disney have merged respective arms, Viacom18 and Star India, in a win-win proposition for both. RIL’s media business shall offer the widest content array (catch-up TV shows, originals, movies, global content, sports) braced by a mammoth distribution ecosystem via RIL’s Jio mobile offering, said Elara Capital.

“There is a high likelihood of Jio charging for its premium content via Jio Prime or such bundled offering, which may be a great strategy to retain subscribers. Further, bundling this wide array with Jio Fiber/Jio 5G Wireless may drive larger scale in subscriber growth, near-to-medium term,” it added while commenting on the JV for RIL and Star India.

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