Shares of Reliance Industries Ltd. (RIL) will be in focus on Monday, November 2, after the conglomerate reported its strongest-ever quarterly performance, with record revenue and a sharp improvement in profitability in the September quarter.
The company’s consolidated profit after tax (PAT) for the first half of FY27 also crossed the ₹50,000 crore mark.
On a sequential basis, RIL’s revenue increased to ₹3.62 lakh crore from ₹3.4 lakh crore in the previous quarter. EBITDA rose to ₹62,409 crore from ₹54,067 crore, while operating profit margin (OPM) improved to 18.8% from 17.3%.
Net profit for the quarter stood at ₹29,550 crore, compared with ₹23,196 crore in the June quarter.
O2C business delivers strong performance
The oil-to-chemicals (O2C) business emerged as a key growth driver, with EBITDA increasing 67% sequentially to ₹25,203 crore, significantly ahead of the estimated 20% growth.
O2C EBITDA margin expanded to 10.8% from 8.4% in the previous quarter. The company attributed the improvement to stronger transportation fuel cracks, which were 3-3.7 times higher year-on-year and touched historic highs.
Margins across the polyester chain also reached a three-year high.
Oil and gas business
The oil and gas segment reported revenue of ₹6,020 crore, compared with ₹6,298 crore in the previous quarter. EBITDA came in at ₹4,901 crore against ₹4,973 crore in the June quarter, while OPM improved to 81.4% from 79%.
The company said lower production and realisations from the KG-D6 gas fields were offset by improved volumes and pricing in its coal-bed methane (CBM) business.
Reliance Retail performance
Reliance Retail Ventures Ltd. (RRVL) reported gross revenue of ₹91,716 crore, registering 6.4% year-on-year growth, adjusted for the demerger of the Consumer Brands business.
The company said the performance was impacted by the shift in the festive calendar to the December quarter.
EBITDA, before a one-time impairment charge, stood at ₹6,228 crore, with an EBITDA margin of 7.8%.
Jio continues to report growth
Reliance Jio’s operating revenue increased to ₹40,475 crore from ₹39,173 crore in the previous quarter and ₹36,332 crore in the year-ago period.
Average revenue per user (ARPU) improved to ₹218.80 from ₹215.60 in the June quarter and ₹211.40 in the corresponding quarter last year.
The company attributed the growth in Jio Platforms’ revenue to subscriber additions, higher ARPU and healthy growth in digital services.
What brokerages are saying
Brokerage firm Goldman Sachs has maintained its ‘Buy’ rating on Reliance Industries, with a target price of ₹1,840. The brokerage said Reliance Industries’ Q2FY27 EBITDA stood at ₹56,600 crore, up 19% sequentially and 23% year-on-year, beating its estimates by 9%.
The outperformance was primarily driven by a strong showing in the O2C business, which more than offset weaker earnings from the retail segment.
Goldman Sachs said the refining business outperformed expectations during the quarter. However, it expects refining margins to moderate sequentially in Q3 due to elevated very large crude carrier (VLCC) freight costs. The brokerage believes Reliance’s ability to process discounted heavy crude barrels could cushion some of the pressure.
The retail business remained a weak spot, with EBITDA declining 11% year-on-year. Revenue growth moderated to 6.4% from 11% in Q1, partly due to the shift in the festive calendar to the December quarter. EBITDA margins also remained under pressure amid continued investments in JioMart, contracting 140 basis points year-on-year.
On the New Energy front, Reliance’s solar module and cell manufacturing capacities currently stand at 6 GW and 5 GW, respectively. Both are on track to scale up to 20 GW in the first half of next year. The company is also making progress on upstream integration across polysilicon, ingots, wafers and glass, according to Goldman Sachs.
In the battery business, the pack/container and cell manufacturing facilities are expected to ramp up in the first half and second half of CY27, respectively.
Meanwhile, transmission connectivity for captive round-the-clock renewable energy (RE-RTC) supply from Kutch to Jamnagar is targeted for completion in the first quarter of CY27. Management expects the segment to start contributing to earnings from FY28.
Nomura has maintained its ‘Buy’ rating on Reliance Industries, with a target price of ₹1,560. The brokerage described the September quarter as a record performance, driven by multi-decade highs in refining cracks. It said consolidated EBITDA increased 19% sequentially, coming in 9% above its estimates, with the O2C business driving the outperformance.
While telecom continued to deliver steady growth, retail performance remained subdued due to the shift in the festive calendar and investments in digital commerce.
At current levels, the stock trades at 8.7 times its FY28 estimated enterprise value to EBITDA (EV/EBITDA) and 16.5 times its FY28 estimated price-to-earnings (P/E) multiple, Nomura said.
Kotak Institutional Equities has also retained its ‘Buy’ rating on Reliance Industries, with a target price of ₹1,500.
The brokerage said consolidated EBITDA of ₹56,600 crore, up 23% year-on-year and 19% sequentially, exceeded its estimates by 7.3%, largely driven by the strong O2C performance.
O2C EBITDA surged 68% year-on-year and 48% sequentially, exceeding Kotak’s estimates by 14.5%. Stronger refining and petrochemical product prices and margins more than offset higher operating expenses and the impact of windfall taxes on the domestic tariff area (DTA) refinery.
The retail business continued to face pressure, with EBITDA declining 10.2% year-on-year and 3% sequentially, missing Kotak’s estimates by 9.5%.
In the exploration and production (E&P) segment, EBITDA declined 2% year-on-year and 1.4% sequentially, although it was 5.6% ahead of the brokerage’s estimates.
Reliance’s reported net debt declined by another ₹5,800 crore to ₹1.17 lakh crore, Kotak said.
Nuvama Institutional Equities maintained its ‘Buy’ rating on Reliance Industries but lowered its target price to ₹1,703 from ₹1,766, factoring in a 25% holding company discount following Jio’s listing.
The brokerage said RIL is currently trading at 18 times its estimated FY28 earnings per share (EPS). It also highlighted the company’s relatively modest net debt of ₹1.17 lakh crore, down 1% year-on-year, as a factor keeping its weighted average cost of capital (WACC) in check.
Nuvama said its ‘Golden Refining Era’ thesis, which anticipates sustainable gross refining margins (GRMs) of more than $10 per barrel, remains intact.
The brokerage expects the New Energy (NE) business rollout to contribute more than 50% to PAT over time and potentially drive a valuation re-rating. It also sees potential valuation benefits for the O2C business from the company’s net-zero carbon target by 2035.
However, Nuvama lowered its FY27 and FY28 EBITDA estimates by 1% each, citing weakness in the retail business.
Of the 31 analysts tracking Reliance Industries, 30 have a ‘Buy’ recommendation on the stock, while one has a ‘Sell’ rating. The consensus price target indicates a potential upside of 39% from current levels.
NOTE TO READERS
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RIL share price: Goldman Sachs sees upside to ₹1,840; strong O2C performance drives Q2 earnings beat