Reliance Industries’ share price has turned a laggard so far this year, shedding almost 20% compared with an 11% decline in the Nifty 50 index so far this year. But this underperformance could end soon, according to Equirus Securities, which sees catalysts for re-rating emerging soon.
India’s most valuable stock’s is at attractive levels, with forward P/E compressing to ~19x (versus average of ~21x) and EV/EBITDA at ~9.9x, even < -1SD band, nearing multi-year trough levels of ~9.6x, the brokerage said.
Medium-term underperformance, near-term positive earnings surprise in O2C and valuation near to post-COVID low make risk-reward equation favourable, Equirus said as it upgraded the to LONG from ADD with a September 2027 target price of ₹1586, suggesting 26% upside from current levels.
What could drive Reliance shares re-rating?
The re-rating in RIL shares would be driven by improving O2C profitability, value unlocking in Jio, resilient retail growth, along with contribution from new energy projects in the next few quarters, said Equirus.
O2C margins poised to recover
After enduring a sharp margin reset, with EBITDA/MT falling to ~$84–90 from peak-cycle levels of $105–118, the worst of the downcycle appears behind, said the brokerage. Supply chain disruption, multi-year high refining spread and improving petchem spreads should drive near-term earnings growth.
As a result, it estimates EBITDA/MT at $97/$105 in FY27E/FY28E, driving EBITDA to ₹644bn/ ₹688bn from ₹605bn in FY26.
Jio can emerge as a steady compounder
is the group’s most predictable earnings engine, as per the brokerage, amid ARPU-led tailwinds. With the last tariff hike nearly two years ago and IPO preparations underway, ARPU-led monetisation remains a key earnings lever and we expect that to happened next 2 quarters.
The company’s ARPU has expanded from ₹150 in FY22 to ₹214 currently. The brokerage expects further increase in ARPU to drive EBITDA to ₹84500 crore in FY27 and ₹93300 crore in FY28, with a margin of 53%.
Capex-market cap playbook
Across three decades, asset base & Mcap of Reliance have moved in near-perfect lockstep, but meaningful rerating has historically required a large, transformative capex cycle, said the brokerage. While assets have grown ~45% during FY22-26, annual capex has largely remained in the 6-9% of asset base range, below prior mega-investment cycles.
It added that outsized equity returns generally follow periods of aggressive asset creation and without a step-up in capex intensity, conditions for another major rerating remain still absent.
New Energy under-appreciated currently
Green Energy Giga Complex has slightly moved from investment phase to execution. In its SOTP, Equirus has valued the New Energy business at ₹1,200 bn (investment value at 1.5x) and expected to aid the company’s earnings.
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