Buy Reliance Industries; target of Rs 1270: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss's research report on Reliance IndustriesReliance Industries (RIL), continuing its stellar GRM trend (USD11.5/bbl, 7‐ year high), clocked record earnings in Q3FY16 with consolidated PAT of INR72.9bn (up 39% YoY, 8% QoQ), 6% ahead of our estimate. As highlighted in our thematic report Shale we refine East!, dated July 17, 2015, a paradigm shift is playing out in regional refining competitiveness amid reversing WTI‐Brent spreads. This is structurally enhancing RIL’s GRM to levels last seen prior to the US shale revolution. Refining throughputs (116% utilisation) also expanded to historic highs (18MMT). Petrochemical EBIT rose 4% QoQ, bucking the trend of weaker benchmark polyester margins, as volumes rose 3% and margins expanded 170bps QoQ. The company has achieved industry leading throughput per outlet (TPO) of nearly 200kl/month from its 750 fuel retail outlets, while shale continued to face headwinds. We believe structural revival in downstream margins and key projects commissioning will double earnings over the next 5 years, despite our lower oil assumption. Maintain ‘BUY’ with a TP of INR1,270. We have lowered our Brent forecast for FY16/17/18 to USD50/52/60 per barrel from USD53/60/65 on slower‐than‐anticipated cuts in US shale output and an expected production increase from Iran. We forecast earnings to double in 5 years as bulk of the USD32bn capex commissions over the next 2 years in addition to a structural upswing in GRMs. Despite a 23% outperformance vs. NIFTY in 2015, the stock still trades at attractive valuations (1.1x FY17E PBR). We maintain ‘BUY/SO’. 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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