Jio Platforms Ltd (JPL) may see limited further upside after a strong 27 percent gain on its listing day, according to a recent analysis by Dolat Capital. The brokerage firm has set a target price of Rs 1,435 for JPL, implying a modest 1.24 percent increase from the prevailing price of Rs 1,417.35.
This new target comes after earlier projections from other major brokerages – Elara Securities (Rs 1,367), MOFSL (Rs 1,350), and Nomura India (Rs 1,340) – were all surpassed on the listing day itself, as the scrip climbed significantly.
Investments Cap Returns Despite Tariff Hikes
Dolat Capital highlighted that despite three tariff hikes implemented in November 2019, November 2021, and June 2024, the return ratios for telecom operators remain sub-optimal. This is primarily attributed to the steep investments required for 5G network expansion and development. The brokerage anticipates that industry-wide tariff hikes will continue approximately every 2.5 to 3 years, with the next round potentially occurring around Q1FY28, aiming for an average revenue per user (ARPU) of Rs 300.
"This is even as organic ARPU growth continues driven by 5G upgradation/differential pricing and possible usage-based data tariffs. JPL prioritised volumes over pricing, allowing Bharti's ARPU premium to widen 22 per cent. We expect this gap to narrow as JioBharat users upgrade to smartphones and JPL gradually reduces its strategic tariff discount," Dolat Capital stated in its report.
Future Growth Drivers and Financial Outlook
Beyond traditional telecom services, Dolat Capital identifies several additional growth drivers for Jio Platforms. These include home broadband, enterprise solutions, digital services like Jio Cloud and PC offerings, and strategic international partnerships. The brokerage projects robust financial growth for JPL over FY26-29, estimating revenue growth of 13 percent, Ebitda growth of 15 percent, and adjusted PAT growth of 21 percent. These figures are expected to be fueled by ongoing tariff adjustments, premiumisation strategies, 5G monetisation efforts, and the introduction of pay-as-you-use models.
With peak capital expenditure intensity now considered to be behind the company, Dolat Capital expects Jio Platforms' free cash flow to strengthen. The firm initiated coverage with an 'Accumulate' rating. Potential risks to this outlook include delays in future tariff hikes and a possible increase in stock supply from pre-IPO investors.
Jio Platforms' Role in RIL's Diversification
Dolat Capital also noted that JPL's evolution marks another significant step in Reliance Industries Ltd's (RIL) strategy to create independent listed entities, diversifying beyond its traditional Oil-to-Chemicals (O2C) business. The brokerage believes that Jio Platforms is poised to transform into an integrated telecom-cum-tech play as it scales up and monetizes its investments in emerging technological areas.