Leading stock brokerages have largely reiterated their 'Buy' ratings on Reliance Industries Ltd (RIL) even after the conglomerate reported a subdued fourth quarter, with consolidated Ebitda largely flat year-on-year or a 4% sequential decline. The results missed analyst estimates, primarily due to weaker performance in its oil-to-chemical (O2C), upstream, and other segments.
Analyst Consensus and Outlook
Despite the earnings miss, analysts from firms like MOFSL, Emkay Global, and Nuvama have largely maintained their positive outlook on RIL. While they have trimmed their FY27 and FY28 earnings estimates by 3-6%, they continue to see significant upside potential, with a particular focus on the company's consumer-facing businesses and new energy ventures.
MOFSL noted that RIL's Q4 was subdued, mainly due to profitability challenges in the Energy business, impacted by disruptions from the West Asia conflict. However, RIL’s consumer segments demonstrated resilience. MOFSL trimmed its FY27E Ebitda and PAT estimates by 3-4% due to energy business weakness and delayed tariff hikes in RJio. They reiterated a 'Buy' rating with a revised target of Rs 1,655.
Emkay Global highlighted that the West Asia crisis disrupted refining operations and impacted petchem deltas due to rising naphtha prices. RIL's diversified sourcing and time charters helped mitigate some of these impacts. Emkay slightly raised its O2C target multiple while cutting targets for Upstream, suggesting a target price of Rs 1,680. The brokerage cut its FY27 and FY28 Ebitda and PAT estimates by 5-6%.
Nuvama also cut its FY27 and FY28 Ebitda estimates by 5% and 3% respectively, factoring in a weaker O2C and retail performance. Despite this, Nuvama retained its 'Buy' rating on the stock, setting a target price of Rs 1,765.
Key Drivers: Jio Platforms and New Energy
Analysts universally point to RIL's strong consumer-facing businesses, particularly Jio Platforms, and its ambitious New Energy initiatives as key future growth drivers. Emkay Global anticipates 4-5% ARPU growth in Jio due to mix changes, even without immediate tariff hikes.
MOFSL emphasized that sustained mid-to-high teen growth in Retail, along with potential tariff hikes in RJio and the impending Jio Platforms Ltd (JPL) IPO, remain crucial triggers for RIL’s stock price.
Nuvama highlighted the progress in RIL’s New Energy rollout, noting that at 10GW capacity, the segment could contribute an additional 6% to the company’s profit after tax. Key components like polysilicon, ingot/wafer, and glass units are expected to commence by the end of FY27, with the Phase-I 40GWh battery pack, containers, and cells starting in FY27. Furthermore, captive power cost reductions could add another 6% to PAT, according to management guidance.