RIL shares fall nearly 3% post Q1; analysts see up to 22% upside

Shares of Reliance Industries (RIL) tumbled nearly 3% in early trade on Monday as investors reacted negatively to its June quarter earnings report. However, analysts see an upside potential of up to 22% on the country’s most-valued stock from the current market prices, expecting continued growth in consumer business and revival in refining and petrochem segments from the current levels.

Reacting to Q1 numbers, Mukesh Ambani-led RIL shares opened lower for the second straight session, down 1.2% at ₹3,070.15. On Friday, the Sensex heavyweight closed 1.92% lower at ₹3,109.50.

In the first hour of trade so far, Reliance Industries shares declined as much as 2.9% to hit an intraday low of ₹3,019.20, while the market capitalisation slipped to ₹20.52 lakh crore.

The share price touched its 52-week high of ₹3,217.90 on July 8, 2024, and a 52-week low of ₹2,221.05 on October 26, 2023. The RIL shares have risen nearly 17% in the calendar year 2024, while it gained 22% in the last one year. The bluechip stock has surged 14% in six months and 5% in the past one month.

Post Q1 FY25, Motilal Oswal has reiterated ‘BUY’ call on RIL with a target price of ₹3,435, an upside potential of 10% from the current level. “We value the Refining & Petrochemical segment at 8x FY26E EV/EBITDA to arrive at a valuation of ₹1,061 per share for the Standalone business. We ascribe an equity valuation of ₹940/sh to RJio and ₹1,579/sh to Reliance Retail as well as assign ₹89/sh towards the new energy business,” the brokerage says in a note.

The brokerage says that segment-wise, the consumer business continues to post double-digit EBITDA growth, with both RJio and Reliance Retail likely to record 25% and 19% EBITDA CAGR over FY24-26, respectively. The growth would be driven by footprint additions, new categories in the retail sector, the focused approach to subscriber growth, and the tariff hikes in the telecom business. In O2C, the agency expects refining and petchem segments to pick up from the current levels, as net capacity additions for both segments are tapering off on a YoY basis. “Moreover, FY25 would witness the full benefit of the ramped-up volumes at the MJ Field,” it adds.

Nuvama has also given ‘Buy’ on the stock with a revised 12-month price target of ₹3,786, a potential upside of 21.7% from the current market price. The agency in its report says that Q1FY25 EBITDA missed estimate by 3%. “O2C (62% of attributable PAT) EBITDA fell 14% YoY/22% QoQ on -30% YoY gasoline cracks and 15–17% lower petchem deltas. Digital (24%) +18% YoY on +9% subs adds. Retail (14%) +16% YoY on 19% rise in footfalls, +15% in operated area. Gas +30% YoY on +44% volume, 14% price decline,” it says in a note.

The brokerage in its report highlights that RIL is rapidly nearing its new energy vision rollout, bagging several PLIs on the way. “It won both solar module PLIs (total $0.7bn, 10GW) with likely incentive of $0.2/kg for GH2, Electrolysers PLI completed recently (estimate $0.3/kg: electrolyser/$0.23: GH2). This implies an aggregate incentive of $0.7/kg (18% of GH2 value chain). Pilots started at Jamnagar for various solar/BESS configurations.”

Among others, Nomura India reiterated its 'Buy' rating on RIL with an upgraded target price of ₹3,600. The agency, however, trimmed its FY25 and FY26 EBITDA estimates by 3% and 2%, respectively.

"RIL is our top pick in the sector. We note the outlook across segments remains optimistic: Retail underpinned by store additions, strong growth of digital/new commerce and operating leverage; and Jio’s tariff increase will lead to value creation and monetisation of investments, enabling an improvement in FCF generation and return ratios; we note upside risks to our FY26F/FY27F ARPU growth estimates," it says in a note.

RIL released its June quarter earnings post-market hours on Friday, which showed that its net profit fell 5.5% year-on-year to ₹15,138 crore for the quarter ended June compared with ₹16,011 crore in the year-ago period. Revenue from operations rose 12% to ₹236,217 crore in the first quarter as against ₹210,831 crore in the corresponding quarter last year. EBITDA increased by 2% year-on-year to ₹ 42,748 crore. 

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