Broker cuts Reliance target despite record earnings
Reliance Industries posted its strongest quarterly EBITDA in 17 quarters during Q2 FY27, yet a leading brokerage has trimmed its price target on the stock. The company’s consolidated EBITDA rose 19% quarter-over-quarter and 23% year-over-year to ₹56,600 crore, beating estimates by 10%. The surge was driven by record profitability in oil-to-chemicals, where EBITDA jumped 48% QoQ and 68% YoY to ₹25,200 crore, a 26% beat. Stronger refining margins and polyester chain gains, hitting three-year highs, fueled the results.
Despite the gains, Motilal Oswal lowered its target price for Reliance Industries from ₹1,560 to ₹1,520, citing persistent challenges in its retail segment. The brokerage kept its Buy rating but noted that while the energy division is delivering near-term earnings growth, retail remains the key variable for stock performance. Reliance Retail’s net revenue grew only 6% year-over-year, missing expectations by 5%, as festive season demand shifted and digital commerce investments weighed on margins. Segment EBITDA fell 10% YoY and 3% QoQ, a 9% miss, due to higher input costs and promotional spending.
The digital services arm, however, showed resilience. EBITDA grew 5% QoQ and 18% YoY, with Jio Platforms contributing steady subscriber additions and scale benefits. Incremental margins for RJio hit 88%, reinforcing its profitability. Exploration and production (E&P) EBITDA declined slightly, down 1% QoQ and 2% YoY, though the company beat estimates by 14% thanks to higher condensate and coal bed methane realizations.
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Profitability improved across the board. Attributable profit for Q2 rose 41% YoY and 22% QoQ to ₹25,600 crore, an 11% beat, as record EBITDA offset lower other income. Capital expenditure remained steady at ₹38,200 crore, while net debt eased by ₹5,800 crore to ₹1.17 lakh crore, reflecting disciplined financial management.
Motilal Oswal pointed to a 54% discount on Reliance’s holding company stock relative to its 64.5% stake in Jio Platforms, calling the gap excessive. The brokerage argued that while energy margins are strong, retail’s slow recovery, hampered by inflation, competition, and shifting consumer behavior, could delay broader upside.
