Reliance Industries Limited (RIL) shares surged more than 2% in Friday's trade, emerging as the biggest contributor to the market rally. The stock opened flat at ₹1,302.55 and climbed to an intraday high of ₹1,332.90 on the BSE, with RIL contributing 145 points to the Sensex's 546-point rally. Nuvama has reiterated its 'Buy' rating on the stock with a target price of ₹1,766, implying an upside of nearly 36% from the previous close of ₹1,301.05. The stock was trading at ₹1,326.45 at 1:46 PM, up around 1.9%. Jefferies has also maintained its 'Buy' rating on RIL shares and marginally raised the target price to ₹1,710 from ₹1,705, implying an upside potential of approximately 32.1% against the brokerage's reference price of ₹1,294.90.
Nuvama expects RIL's consolidated EBITDA to rise by 12% year-on-year to ₹513 billion in Q2 of the current fiscal year, while PAT is estimated to increase by 9% year-on-year to ₹197 billion. The growth will be largely driven by the Oil-to-Chemicals (O2C) business, with O2C EBITDA expected at ₹182 billion, up 21% year-on-year, owing to robust gasoil and ATF crack spreads supported by geopolitical disruptions. The brokerage noted that a 'golden refining era' is underway for RIL, supported by strong refining margins and multiple growth drivers. Additionally, RIL will benefit from stable ethane prices, start-up of its ethane carriers and non-applicability of Special Additional Excise Duty (SAED) on exports from RIL's SEZ refinery. Singapore Gross Refining Margin (GRM) averaged $21.2 per barrel in the second quarter of FY27 to date, with Jefferies estimating average petrochemical margins across polyethylene (PE), polypropylene (PP) and polyethylene terephthalate (PET) are up 64% in the second quarter of FY27 to date compared with the end of February.
RIL's Q2 EBITDA will be supported by the Digital EBITDA of ₹219 billion, up 16% year-on-year on a 3% year-on-year rise in ARPU and over 7% year-on-year increase in subscribers. However, the Retail EBITDA is expected to decline by more than 1% year-on-year due to a higher base in Q2FY26 following an early festive season and the impact of the RCPL demerger, with its EBITDA margin estimated at 7.5%, flat sequentially. JPMorgan expects the retail business to do well in the December quarter on the back of base effects on the margins front, while the O2C business should also do well. The combination of strong refining margins, petrochemical spreads, and potential retail recovery positions RIL favorably for sustained growth.
Nuvama expects RIL's New Energy business to drive the next leg of growth and can lead to valuation re-rating. The brokerage's analysis suggests that EBITDA contribution from the New Energy businesses can potentially grow to ₹201 billion by FY30, surging at a CAGR of 137% over FY27–30E. The New Energy's PAT contribution could reach ₹106 billion by FY30E, accounting for around 8% of RIL's total PAT. This growth trajectory could potentially see the New Energy business surpass the O&G business by FY30E and move closer to Retail EBITDA, representing a significant diversification opportunity for the company.
RIL has strong analyst coverage, with 30 of the 31 analysts tracked having a 'Buy' recommendation, while one has a 'Sell' rating, as reported by CNBC TV18. The stock is currently trading 0.4% lower on Thursday at ₹1,307.7, despite the positive rating updates from major brokerages. JPMorgan has currently not ascribed any value to the renewables venture yet, neither for its real estate holdings or for its fast-growing FMCG business, leaving room for potential upside as these segments mature. However, the brokerage notes that mathematically, JPMorgan expects further downside pressure for Reliance in case retail multiples go further down, or the holding company discount increases further. The combination of strong refining margins, petrochemical spreads, and potential retail recovery positions RIL favorably for sustained growth, with analysts maintaining bullish sentiment despite recent stock performance challenges.
