Buy Reliance Industries; target of Rs 1248: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss Securities's report on Reliance IndustriesWe forecast Reliance Industries (RIL) to report subdued Q2FY16, with a 7% QoQ fall in PAT to INR59bn (standalone). Key reasons being: (1) refining margins will decline (we expect USD9/bbl) tracking the 23% QoQ fall in Singapore benchmark and expected inventory losses amidst 20% fall in oil price; (2) GRM premium over Singapore benchmark will however expand, as RIL will not be impacted by the plunge in fuel oil cracks, while correction in diesel cracks hurts; and (3) we expect petchem margins to improve, given 23%/27% surge in polymer/polyester spreads. We believe the stock has already overreacted to weak earnings expectations and is pricing in less than USD20/bbl long-term crude. We reiterate ‘BUY/SO’, with a target price of INR1,248.Outlook and valuation: Concerns overdone; maintain ‘BUY’ The expected fall in RIL’s earnings is likely significantly lower than the steep 30% QoQ drop forecast in Cairn’s earnings and is in line with ONGC, due to its vertical and horizontal diversification. We believe concerns about the sharp erosion in stock price (12% in 2 months) amidst plummeting oil prices are overdone, as highlighted by us in our recent Stress Test note “Crude Defence”. We believe the WTI-Brent spread is narrowing on falling oil prices, in turn enhancing RIL’s competitiveness. At 1x FY16E PBV, the stock trades at near all-time lows and compares with 4.2x that it was quoting at ahead of similar capex completion phase during 2005-07. The upcoming RJIO launch should trigger valuation re-rating for RIL. Maintain ‘BUY/SO’ with a TP of INR1,248, says Edelweiss Securities Limited research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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