Goldman Sachs on Thursday said Reliance Industries Ltd (RIL) could potentially become a $100-billion market capitalisation stock by 2016-17 from about $48 billion now.
To accomplish that, Goldman believes the Mukesh Ambani-led firm needs to get government approvals on investments and gas prices, restrict its focus to core businesses and return some of its surplus cash in the form of dividends or buybacks, among other measures.
“We believe RIL’s share price is discounting near-term concerns, and the short-term outlook justifies upside potential of 17 per cent,” Goldman analysts said in a note to clients.
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“However, if the management were to deliver on a number of eminently achievable objectives, then we could see a potential near-doubling of market cap in the next four years as the group’s returns move from among the lowest in its peer group to top quartile,” they added.
At present, RIL is ranked 21st among the top global oil and gas companies by market cap, Bloomberg data compiled by BS Research Bureau showed.
Investor concerns such as returns from new capital spending or the cyclical downturn are largely discounted, Goldman analysts argue in the note.
“Current share price is giving little credit to management for refocusing investment in core activities and its potential impact on cash returns, in our view,” analysts said.
Goldman maintained its “buy” rating on the RIL stock and raised its sum-of-the-parts target price to Rs 936 from Rs 870 to reflect improved refining and exploration and production valuations.
RIL shares on Thursday rose 2.04 per cent, or Rs 16.30, to Rs 815.05 on BSE, while the benchmark Sensex ended trade at 17,657.21, down 0.40 per cent from the previous close.
