Reliance Industries’ (RIL) strong performance in its oil-to-chemicals (O2C) business in the September quarter (Q2) has prompted brokerages to raise their earnings estimates, even as concerns over the Retail business and macro volatility led some to trim their price targets.
A sharp improvement in refining profitability drove a better-than-expected operating performance and best-ever earnings on the back of a sharp jump in fuel cracks and downstream deltas. Jio’s earnings before interest, tax, depreciation and amortisation (Ebitda) beat estimates on better ARPU and margins, while Upstream was largely range-bound. Retail, though, was weak, with revenue up 1 per cent year-on-year (YoY) and Ebitda down 10 per cent as festive season mismatch and input cost inflation weighed.
As a result, the global investment bank raised its FY27 and FY28 EBITDA by 6 per cent and 2 per cent, respectively. It added that RIL stock trades >2 standard deviations below the long-term average EV/Ebitda, suggesting maximum pessimism. Its target price of ₹1,710 signals 47 per cent upside.
Dolat Capital, which raised its PAT estimates by 6.2 per cent for FY27, said its constructive stance is underpinned by industry-leading capabilities across O2C, Retail, and Digital, and expectations of a strong EPS CAGR over the next two years. It has a target of ₹1,635/share (from 1,670 earlier), with a ‘BUY’ rating.
Going ahead, Emkay Global expects Jio to maintain its trajectory, and Retail to recover as festive demand picks up. “We raise FY27/28/29E EPS by 15/8/3 per cent, building in better O2C earnings; we realign our blended target multiple lower, from 13x to 11.5x, given weaker Retail, macro volatility, and valuing Jio near CMP with 20 per cent holdo discount,” it added.
The domestic brokerage cut Sep-27E target price by ~8 per cent to ₹1,550, though noted that “valuations are highly attractive owing to the recent stock weakness.”
Nomura, too, said that it has changed its FY27F/28F EBITDA estimates by 2 per cent/-5 per cent on higher O2C estimates and lower Ebitda forecasts for the Retail business.
Going ahead, adverse commodity/currency movement, competition, delay in monetization of ventures, and policy risks are among the key risks that RIL faces.
Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.
