Check out why Reliance Industries Limited is still fund managers' favourite stock

According to business reports, Reliance Industries Limitedwas the second-most bought stock in February 2023. The RIL share held by fund houses soared over 330 million, up from 320 million, rising over 23 billion in value.Why is this oil to telecom conglomerate a favourite across the fund houses? 

The answer lies in its product portfolio. "Long-term products and dominant standing of RIL in each of its product and service portfolio, provide comfort for long term value creation," a report by ICICIdirect said. While being old and a mammoth, it understands its traditional business, despite being a cash cow, which is not the group's future. So, they have pivoted very successfully in various directions.

RIL is India's biggest conglomerate with a massive presence in oil refining & marketing, petrochemicals, oil & gas exploration, retail, digital services, and media, making it a well-diversified company.Meanwhile, the company's results have been ahead of estimates on the profitability front, giving it an edge. Reliance share price posted a 54% rise in YoY revenue, with all key segments reporting revenue growth.

It grew nearly 10% quarter-on-quarter, led by retail and O2C segments. It reported an exceptional gain of Rs. 2,836 crore owing to the sale of shale gas assets in North America. Its profit after tax subsequently rose to Rs. 18,549 crore. Additionally, the continued growth of its green energy business has helped RIL share price. 

Owing to this performance, brokerages see a near-20% upside in the stock. ICICIdirect has a 'buy' call on the stock with a target price of Rs. 2,950 for 12 months. It said, "RIL's customer business will be the driver, going ahead. The company has a strong balance sheet post fundraising while its traditional business will go on to generate steady cash flows."

According to the brokerage, the increment in value accretion from the digital ecosystem that will be captured at the Jio Platforms levelcan be acrucial triggerfor the future price performance of RIL share.

The report added that a steady FCF generation in the retail segment enables the company to maintain debt at lower levels. It also improves its ability to invest in future inorganic opportunities. Plus, the steady cash flow in the O2C segment is expected to continue, the brokerage said, adding that the cash will allow the company to invest in new energy verticals. 

For disclaimer and detailed report, click here: 

https://www.icicidirect.com/mailimages/IDirect_RelianceInd_Q3FY22.pdf