Over the past year, the Nifty 50 has outperformed the shares of Reliance Industries, the largest corporation in India by market capitalization. The Nifty 50 has produced a noteworthy 19% return during the same period, but Reliance’s stock has increased 7%. Experts, however, think Reliance may be ready for a change, pointing to the company’s new energy business’s growing value as a major growth engine.
In recent months, the heavyweight stock has underperformed. Since July 8 of this year, when it reached a 52-week high of ₹1,608.80, it has experienced persistent profit booking.
Monthly, the stock experienced a 4% decline in July and a slight 0.3% increase in August. Nonetheless, it started to decline again in September, falling 2%, and then had a precipitous 10% decline in October. It has dropped by an additional 5% so far in November.
The company’s diminishing profit and profit margin may have contributed to the stock’s decline.
The business said that its Q2FY25 consolidated net profit for the September quarter of this year was ₹19,101 crore, down 3.6% year-on-year (YoY) from ₹19,820 crore in the same period last year.
While the EBITDA margin decreased by 50 basis points to 17%, the company reported a 2% YoY reduction in EBITDA to ₹43,934 crore.
Long-term experts believe this stock is worth purchasing. With a target price of ₹1,650, international brokerage company CLSA recently kept its “outperform” rating on the stock. The foundation of CLSA’s positive outlook is its conviction that the market is overlooking Reliance’s $40 billion new energy sector.
The brokerage did, however, list several possible negative triggers, including the postponement of the commencement of new energy projects, the prolongation of Reliance Retail’s weak performance over two to three quarters, and the absence of evidence of the 5G capital expenditures’ profitability.
