Nuvama Institutional Equities on Thursday retained its ‘Buy’ rating on Reliance Industries Ltd, with a target price of Rs 1,766 a share, saying the oil-to-telecom major could report a stronger-than-expected Ebitda growth in the September quarter. The domestic brokerage said consolidated Ebitda for RIL may rise 17 per cent year-on-year (YoY), against its earlier assessment of 12 per cent growth, driven by a further expansion in middle distillate crack spreads.
The brokerage said profit after tax for the quarter could come in at Rs 20,900 crore, up 15 per cent YoY, while consolidated Ebitda is seen at Rs 53,700 crore. Nuvama said RIL has multiple growth levers and described the current phase as a “golden refining era”.
For the second quarter, Nuvama said gains in oil-to-chemicals (O2C) and digital segments are expected to partly offset weaker trends in oil and gas and retail segments.
Nuvama said Reliance’s oil-to-chemicals Ebitda may rise 38 per cent YoY and 22 per cent quarter-on-quarter (QoQ) to Rs 20,700 crore. It attributed this to robust gasoil crack spreads averaging $71 per barrel, up four times YoY and 13 per cent sequentially.
Nuvama also attributed the expectations a four times YoY jump in ATF crack spreads ($69 per barrel).
It also said the Mukesh Ambani-led company would benefit from higher ethane imports following the addition of its seventh ethane ship, stable ethane prices, which were up 2 per cent YoY, and the SEZ refinery exemption from Special Additional Excise Duty, partly offset by diversion of propane and butane for LPG production away from higher-value petrochemicals.
The brokerage said digital Ebitda may stand at Rs 21,900 crore, up 16 per cent YoY, supported by a 3 per cent rise in average revenue per user (ARPU) and 7 per cent growth in subscribers.
Retail Ebitda, however, is seen declining 1 per cent YoY on a higher base in Q2FY26 due to the early festive season and the impact of the RCPL demerger, with Ebitda margin estimated at 7.5 per cent, flat quarter-on-quarter. Oil and gas Ebitda is projected to fall 6 per cent year-on-year because of an 8 per cent decline in KG-D6 output and an 11 per cent fall in gas realisation.
Nuvama said Reliance’s modest net debt of Rs 1.23 lakh crore, up 5 per cent YoY, keeps WACC in check. It said its thesis of a sustainable gross refining margin of more than $10 per barrel remains intact and added that the NE rollout could add more than 50 per cent to profit after tax while also re-rating valuation, including oil-to-chemicals, given its net zero-carbon target by 2035. The brokerage kept its estimates and target price unchanged at Rs 1,766 and reiterated its ‘Buy’ call on the stock.