Credit Suisse ups RIL share target price to Rs 1,690; leaves rating unchanged at neutral

Credit Suisse has raised the share price target for Reliance Industries to Rs 1,690 from Rs 1,375 to factor in a higher enterprise value of Jio to $ 88.5 billion, driven by the growth in the non-wireless businesses.

The international brokerage has left the rating unchanged at ‘neutral’. The non-wireless operations of Jio includes-- health, education, agri-tech, home broadband, enterprise services, Internet of Things (IoT), and Jio’s app suite. On Monday, shares of the company closed at Rs 1934.30 on the Bombay Stock Exchange, down 3% from previous close.

“We now value Jio’s non-wireless verticals, given the significant progress in many of them and the possibility of aggressive customer ramp-up enabled by the recent significant deleveraging (US$23.7 billion),” Credit Suisse said in a report.

The brokerage has assigned an enterprise value of $17.5 billion for non-wireless Verticals, which increase Jio’s EV to $88.5 billion.

“Our view is that Jio has competitive advantages with its full stack of services in many verticals like online health and education; many of these verticals can be scaled up significantly; Jio has already started monetising through advertisements on MyJio and JioSaavn; and the foray into agri-tech, IoT, financial services, and enterprise services is in the early stage, but competition is also limited in most,” the report said.

The next triggers for the RIL shares may be more clarity on the new commerce initiative, and the deal with Saudi Aramco for its ‘oil-to-chemicals’ business, the brokerage said.

Credit Suisse said the best case scenario, or ‘blue sky’ as it refers to it, will value the share prices at Rs 2,300 each. “Blue sky builds in positive outcome on Aramco deal in energy vertical at EV of $75 billion, Jio's steady state ARPU increasing to Rs 250 (base case: Rs 200), grocery distribution through kirana stores and monetising customer shopping data through advertisements, and synergies from potential acquisition of Future Retail and Future Lifestyle,” the report said