Reliance Industries stock outlook bullish on strong O2C earnings, steady Jio growth; check target prices, upside

Reliance Industries shares closed at Rs 1,164.90 on Friday, October 30, down 0.21 percent ahead of the company's Q2 FY27 results announcement. The Mukesh Ambani-led conglomerate had a market capitalisation of Rs 15.76 lakh crore. Reliance Industries reported its strongest-ever quarterly financial performance in the fiscal second quarter, with record revenue, EBITDA and net profit, driven by robust growth in its O2C business, digital services and retail operations.

Consolidated revenue surged 28 percent year-on-year to an all-time high of Rs 3.62 lakh crore, while EBITDA increased 24 percent to a record Rs 62,409 crore. Net profit jumped 34 percent to Rs 29,550 crore, also a quarterly record. The O2C business delivered its strongest-ever quarterly performance, with revenue rising 44.2 percent year-on-year to Rs 2.32 lakh crore and EBITDA surging 67.9 percent to Rs 25,203 crore.

According to Goldman Sachs, Reliance's Q2 EBITDA beat its estimates by 9 percent, led by strong O2C performance. However, Goldman Sachs expects refining margins to moderate in the third quarter due to higher very large crude carrier (VLCC) freight costs, although this could be partly offset by processing discounted heavy crude. The brokerage said that Reliance Retail's EBITDA declined 11 percent year-on-year, while revenue growth slowed to 6.4 percent from 11 percent in the preceding quarter, reflecting the timing of festive demand and investments in JioMart.

Retail EBITDA margin contracted 140 basis points year-on-year. On Reliance's new energy business, Goldman Sachs said the company's solar module and cell manufacturing capacities of 6 GW and 5 GW, respectively, remain on track to reach 20 GW each in the first half of next year. Battery pack and container facilities are expected to ramp up in the first half of calendar year 2027, followed by battery cell facilities in the second half.

The Kutch-Jamnagar renewable energy power transmission project is targeted for completion in the first quarter of 2027, while earnings contributions from renewable energy and round-the-clock power operations are expected from FY28. Nomura attributed Reliance's record second-quarter performance to multi-decade-high refining cracks, adding that consolidated EBITDA rose 19 percent sequentially and exceeded its estimates by 9 percent, driven primarily by the O2C segment.

Nomura said the telecom business continued to deliver steady growth, while retail performance remained soft due to the shift in festive demand and ongoing investments in digital commerce. The brokerage said that Reliance Industries trades at 8.7 times its estimated FY28 enterprise value-to-EBITDA ratio and 16.5 times its estimated FY28 price-to-earnings ratio.