Buy Reliance Industries; target of Rs 1248:Edelweiss

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26 Aug, 2025 12:21

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Edelweiss's reserach report on Reliance IndustriesRIL is the largest private player in the refining, petrochemical and E&P sectors in India. While RIL’s refining complex in Jamnagar is the largest in the world and among the most complex, it is also among the largest integrated petrochemical producers globally. Apart from E&P in India, RIL has made significant investments in US shale gas. In terms of EBIT, Refining contribute 60% and Petrochemicals 30%. RIL is also expanding its presence in the areas of consumer retailing and telecom. EBIT contribution from retail is 2% while telecom operations will be launched in December 2015, which we believe will have 3 years of startup losses at EBITDA level. RIL has a weight of 9.1% in BSE Sensex and 7.5% in S&P CNX Nifty.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.Disclaimer: for RIL & N18

(Disclosure: Reliance Industries has made an open offer for the takeover of Network18, which owns Moneycontrol.com and other digital, print and TV channels). 

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