Reliance’s share price has corrected by almost 22% from its 52-week high, and with the company set for a recovery phase, the stock has become extremely attractive in terms of valuation.
India’s largest company by market capitalisation has seen a $50 billion reduction in market capitalisation since September 2024, driven by a 13% decline in EPS and a 10% drop in EBITDA consensus estimates.
RIL’s current valuation is at its lowest since the market turbulence caused by the COVID-19 pandemic in March 2020.
Thus, analysts are of the consensus that valuations, currently at a three-year low, present an attractive risk-reward proposition.
“Reliance stands to be a very interesting bet here. There has been good correction here…valuations have become very attractive out here and all businesses have been doing fine. So, I do not see any reason why Reliance should be here and we remain quite optimistic on it,” Varun Saboo, head of equities at Anand Rathi told ET NOW
Reliance share price targets
Global brokerage Morgan Stanley on Thursday set a target price of Rs 1,662- an upside of 31% from current levels- for the stock while maintaining its overweight rating.
Morgan Stanley said that refining, a significant driver of RIL’s free cash flow (FCF) generation, is poised for growth due to increased global capacity.
This expansion is expected to capture a substantial portion of global demand growth in 2025, with further tightening of the market projected through 2027.
Morgan Stanley also anticipates improved profitability in RIL’s retail segment in FY26.
This improvement is expected to be driven by the rationalization of the company’s store footprint, which has seen a reduction of approximately 3.6 million square feet over the past two quarters.
Brokerage Bernstein on Wednesday also highlighted that telecom and retail will drive Reliance’s earnings growth and the company is set for its recovery phase.
Bernstein rated the stock ‘outperform’ with a target price of Rs 1,520, which is an upside potential of 22.5%.
Jefferies rated the stock a “Buy” with a target price of Rs 1,690- an upside potential of 36%
Reliance: earnings forecast and valuation
According to Bernstein, Jio’s Average Revenue Per User (ARPU) is anticipated to grow by 12% in the near term, even without tariff hikes, supported by subscriber growth of 4-5%.
The Retail segment is projected to deliver double-digit EBITDA growth, providing further strength to Reliance’s performance. In the refining business, Gross Refining Margins (GRMs) are expected to improve after declining to $9 per barrel in FY24.
The brokerage anticipates a free cash flow (FCF) boost from FY25-27, supported by a steady-state EBITDA of approximately $22 billion.
Bernstein forecasts an approximate 20% CAGR in EPS growth through FY26.
Key growth drivers include improving FCF as the capital expenditure cycle winds down, a retail segment rebound, and potential spin-offs.
However, consolidated “Others” revenue projections for FY25-26 have been trimmed by 15-20%.
Jefferies anticipates a 14% growth in Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) for RIL in FY26, driven by contributions from all business segments.
Bernstein said valuations remain appealing, with RIL currently trading at 10.1x 1-year forward EV/EBITDA—a 17% discount to its three-year average.
Jefferies views the current low valuation as a strong opportunity for investors, highlighting RIL’s potential for robust growth across its diversified operations.
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