RIL market cap hits Rs 21 lakh crore milestone as target prices rise on Jio tariff hikes

Shares of Mukesh Ambani-owned Reliance Industries (RIL) today became the first Indian company to cross the Rs 21 lakh crore market capitalization milestone as its stock jumped over 2% to hit new record high of Rs 3,129.85 on NSE after Jio raised the pricing of its prepaid and postpaid plans. Global brokerages like Morgan Stanley and Jefferies see upside potential of up to 15% in Reliance's stock as they are positive on the company’s future outlook following the update.

The tariff hikes were largely in line with the market’s expectations. However, Jio taking the lead in raising tariffs and shifting focus to improving returns on investments, is a sentimental positive, according to the brokerages.

Here is what the brokerages have to say:

Jefferies

Jio has raised tariffs by 13-25% and the global brokerage firm has cut Jio's FY25-27 estimates by up to 3%. Jefferies states that they expect Jio to deliver 18/26% Revenue/PAT CAGR over FY24-27 and have tweaked RIL's FY25/26 EBITDA by 0-1% to incorporate Jio's numbers.

Jefferies has a ‘buy’ call on Reliance with a target price of Rs 3,580.

Morgan Stanley

Morgan Stanley stated that the RIL's telecom tariff increases are in line with their base case expectations. Monetisation of investments remains in play and the next catalyst to watch will be the startup of new energy cash flow streams by the end of 2024. They do not assume any further tariff hikes till FY27 but another approximately 20% tariff hike in the next year can raise earnings by 10-15%.

The global brokerage firm has an ‘overweight’ call on RIL with a target price of Rs 3,046.

Further, here is how other brokerages view the update regarding the tariff hike:

Kotak Institutional Equities

The tariff hike is largely in line with Kotak Equities’ expectations (20% from June 2024) and is already built into their estimates. Further, R-Jio has also restricted unlimited 5G data usage to 2GB/day and above plans (versus Rs239 and above plans earlier), which could potentially lead to up-trading by higher data consumers. The domestic brokerage firm expected Bharti Airtel and Vi to also raise tariffs soon, among which, the former has already announced tariff hikes of 10-21%.

Antique Broking

Overall, the tariff hike is a big positive for the sector and Antique Broking expects further re-rating in the space. They said that they would wait for the others to announce hikes to see if Jio's tariff discount increases or decreases. They had already built in the tariff hike into the assumptions and therefore their estimates remain unchanged.

JM Financial

Jio leading tariff hike this time is positive for future tariff hikes as earlier tariff hikes were led by Bharti Airtel, and Jio was being considered as a reluctant follower in its drive to gain subscriber market share.

“Assuming Bharti and VIL follow with similar tariff hikes and the next tariff happens only by end-FY26/early FY27 (our base case scenario), we see a limited 1-3% upgrade to our FY25 and FY26 ARPU/EBITDA estimate,” stated a report by JM Financial.

However, it is to be noted that Bharti Airtel has already announced its tariff hikes.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)