Reliance shares: Bernstein, Jefferies bullish on Mukesh Ambani company, see up to 36% upside potential; stock rises 2%

Shares of Reliance Industries Limited (RIL) rose by over 2 per cent in intra-day trading on Wednesday, January 8, as global brokerage firms Bernstein and Jefferies reiterated their bullish views on the stock. Analysts foresee an upside potential of up to 36.2 per cent in Reliance share price following the recent correction.

Both Bernstein and Jefferies believe in RIL’s long-term growth potential, however, they highlighted various challenges in the near term.

Reliance Stock Price Trend

RIL stock rose as much as 2.3 per cent to its day’s high of ₹1,269.85. It is currently 21 per cent away from its peak of ₹1,608.95, hit in July 2024. Meanwhile, it has advanced almost 6 per cent from its 52-week low of ₹1,202.10, recorded in December 2024.

The scrip lost 4 per cent in the last one year. Meanwhile, just in January, it has added over 4 per cent after four straight months of losses. RIL stock declined 6 per cent in December, 3 per cent in November, 10 per cent in October and over 2 per cent in September.

RIL Shares: Brokerage View

Bernstein: Outperform| Target price: ₹1,520| Upside potential: 22.5%

Brokerage Bernstein highlighted that Reliance Industries Limited, under the leadership of Mukesh Ambani, is set for a recovery phase, with earnings growth primarily driven by its Telecom and Retail segments. Additionally, refining margins are expected to recover, enhancing the company’s financial outlook.

According to Bernstein, Jio’s Average Revenue Per User (ARPU) is anticipated to grow by 12 per cent in the near term, even without tariff hikes, supported by subscriber growth of 4-5 per cent. 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 noted that RIL has seen a $50 billion reduction in market capitalisation since September 2024, driven by a 13 per cent decline in EPS and a 10 per cent drop in EBITDA consensus estimates. However, Bernstein believes this represents a trough in EBITDA, with potential growth exceeding 19 per cent in FY26. 

Valuations, currently at a three-year low, present an attractive risk-reward proposition. Valuations remain appealing, with RIL currently trading at 10.1x 1-year forward EV/EBITDA—a 17 per cent discount to its three-year average. 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 per cent 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 per cent.

Jefferies: Buy | Target price: ₹1,690| Upside potential: 36%

Jefferies noted that Reliance Industries underperformed the Nifty 50 index by 15 per cent in 2024, largely due to concerns over medium-term growth prospects in its retail business and weaker earnings growth during the financial year. This marked the first instance in nine years where Reliance delivered negative returns in a calendar year, raising apprehensions among investors.

The brokerage emphasised that RIL’s current valuation is at its lowest since the market turbulence caused by the COVID-19 pandemic in March 2020. Jefferies remains optimistic, projecting a revival in RIL’s retail segment with mid-teen growth rates, potential value unlocking through the listing of Reliance Jio, and improved profitability in the Oil-To-Chemicals (O2C) business by FY26.

Jefferies anticipates a 14 per cent growth in Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) for RIL in FY26, driven by contributions from all business segments. The brokerage views the current low valuation as a strong opportunity for investors, highlighting RIL’s potential for robust growth across its diversified operations.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.