Brokerages retained their bullish stance on Reliance Industries Ltd after the conglomerate reported stronger-than-expected fiscal first quarter results. Analysts cited robust earnings from the oil-to-chemicals (O2C) business, steady growth at Jio and an improving outlook for its new energy ventures.
While most flagged continued pressure on retail margins, they said the company’s diversified earnings profile and multiple long-term growth drivers support a constructive view on the stock.
Goldman Sachs maintained its 'Buy' rating on Reliance Industries stock with a target price of Rs 1,870, implying about 41 percent upside from Friday's closing price. The brokerage said core EBITDA for the April-June quarter was broadly in line with expectations, with the O2C business performing better than anticipated despite elevated crude oil prices. It expects the earnings outlook to become more constructive in the September quarter. The brokerage highlighted RIL’s upcoming commissioning of its fully integrated solar photovoltaic and battery manufacturing facilities as a key catalyst.
Nomura also reiterated its 'Buy' rating with a target price of Rs 1,690. It said Reliance delivered a record quarter, driven by a sharp improvement in O2C crack spreads, with strength in the energy business more than offsetting weakness in retail. The brokerage said that O2C EBITDA climbed to a four-year high of about Rs 17,000 crore, while exploration and production EBITDA improved to around Rs 5,000 crore. Jio's revenue growth was supported by subscriber additions and higher average revenue per user (ARPU), although Nomura said recovery in retail margins remains a key monitorable.
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CLSA maintained its 'Outperform' rating and raised confidence in the company's earnings trajectory after EBITDA and profit after tax exceeded its estimates by 3 percent and 20 percent, respectively. The brokerage attributed the beat to stronger O2C earnings and higher other income. It said the FMCG and media businesses continued to deliver strong growth, and highlighted management’s target of doubling retail EBITDA over the next three years. CLSA also sees new energy, resilient O2C earnings, retail recovery and potential value unlocking in FMCG and media as key triggers for the stock.
Macquarie retained its 'Outperform' rating with a target price of Rs 1,510, saying strong O2C performance and consistent growth at Jio offset softer retail margins. The brokerage also sees scope for both Jio and the retail business to exceed consensus earnings estimates, adding that management's three-year retail EBITDA target provides confidence in the long-term growth outlook.
Morgan Stanley said Reliance’s June-quarter earnings beat Street expectations on both quality and profitability, with refining and chemicals emerging as the biggest drivers of the upside surprise. The brokerage also said that consumer retail growth remained steady and said execution across the company’s solar, polysilicon and battery manufacturing projects continues to accelerate.
Reliance Industries shares were trading at Rs 1,327.80 in morning trade on Monday, little changed from the previous close. The company reported record recurring operating profit and its highest-ever recurring quarterly profit for the June quarter, supported by double-digit growth across its O2C, digital services and retail businesses.