Goldman Sachs forecasts 54% upside for Reliance Industries; says value accretion from RIL-Disney JV

This optimistic outlook is based on Goldman Sachs’ bull case scenario estimates for the financial year 2026, projecting RIL’s share price to reach Rs4,495.

Goldman Sachs has maintained its “buy” recommendation on Reliance Industries, revising its price target on the stock to Rs 3,400 from Rs 2,925 previously. This revised target suggests a substantial upside of 17% from the closing price recorded on Tuesday.

The brokerage firm remains bullish on RIL’s risk-reward profile, citing favorable factors such as the expected value accretion from the Reliance-Disney joint venture.

Additionally, Goldman Sachs anticipates RIL’s consolidated returns to be at an inflection point in the financial year 2024, with its Cash Return on Cash Invested (CROCI) forecasted to expand by nearly 270 basis points to 12% by the financial year 2027, marking the highest level since 2011.

Over the last decade, Reliance Industries has allocated over $125 billion in capital expenditures, predominantly in hydrocarbon and telecom sectors. However, Goldman Sachs highlights a shift in RIL’s investment focus towards less capital-intensive ventures such as Retail and New Energy, which offer higher returns and shorter gestation periods.

Goldman Sachs projects significant growth in Reliance Retail’s Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA), nearly doubling between financial year 2024 and 2027, with a corresponding increase in its share of consolidated EBITDA. Similarly, the brokerage expects positive EBITDA contributions from the New Energy vertical to commence by financial year 2025, reaching $2.3 billion by financial year 2030.

Analyzing RIL’s consolidated performance, Goldman Sachs foresees a turnaround in free cash flow by financial year 2025, as capital expenditure is expected to peak in the preceding financial year. Furthermore, the brokerage anticipates a 20% year-on-year expansion in EBITDA, driven by various factors including a telecom tariff hike, higher retail same-store sales growth, and improved chemical margins.

Goldman Sachs forecasts a robust EBITDA Compound Annual Growth Rate (CAGR) of 17% between financial year 2024 and 2027, propelled by the doubling of Retail EBITDA and a 22% CAGR in the telecom business. Key drivers include higher telecom Average Revenue Per User (ARPU), smartphone adoption, fixed broadband traction, petrochemical margin recovery, and operational expenditure reduction.

The brokerage notes that Reliance Industries’ shares historically outperform the Indian market during periods of expanding returns and valuation discovery through stake sales in newer businesses. With expectations of rising returns and potential value unlock through listings of consumer businesses, Goldman Sachs predicts a positive trajectory for RIL’s shares in the foreseeable future.