Reliance stock: Jio listing, tariff hike key triggers; valuation cheapest since Covid, says Jefferies

Jefferies in its latest note on Reliance Industries said recovery in Reliance Retail's revenue growth to high single digits signals consolidation is largely behind, strengthening its case for a FY26 growth recovery to 15 per cent. A tariff hike, likely listing of Jio Infocomm and an improvement in the oil-to-chemicals (O2C) profitability from cyclical lows are other potential triggers for RIL in FY26, the foreign brokerage said.

The brokerage has a bull case target of Rs 1,850 on RIL, a base case target of Rs 1,660 and a bear case target of Rs 1,150 on the oil-to-telecom major.

Jefferies said the prevailing RIL valuation at 9.8 times forward Ebitda is the cheapest since the Covid correction. It forecast 13 per cent Ebitda growth for RIL in FY26, as it maintain 'Buy' on the stock but trimmed its target price to Rs 1,660. 

The foreign brokerage said the RIL stock has corrected 20 per cent since its July peak on slower earnings growth and concerns on Retail's growth over the medium term. 

In the December quarter, the consolidated Ebitda by RIL was 5 per cent ahead of Jefferies with Retail and O2C segment Ebitda 8 per cent and 3 per cent ahead of its estimates.
The restoration of growth in Retail signals that worst is likely behind, with express deliveries piloting in 4,000 pincodes, Jefferies said.

"Jio's Ebitda missed by 2 per cent on slightly lower ARPU and elevated cost. O2C profitability was aided by refining, where we see improved outlook in FY26. Further traction in Retail, tariff hike and possible listing of Jio could be triggers in FY26," it said.

In its base case, Jefferies is execting 20 per cent Ebitda CAGR in Jio over FY24-27E, helped by 51.9 crore subscribers at Rs 221 ARPU, 13 per cent Ebitda CAGR in Retail, 5 per cent Ebitda CAGR in refining and 1 per cent Ebitda CAGR in petchem over the same period.

In its base case, it values O2C business at 8 times EV/Ebitda, India mobile at 13 times and core offline Retail at 28 times. 

In the bull case, Jefferies sees a recovery in GRMs/petchem margins ahead of its estimates. It sees a faster consolidation in telecom leads to tariff upside in Jio. It is also factoring in possible public listing of Jio and re-rating of valuation multiple. Besides, the bull case sees Reliance retail gaining market share faster than expected and Jiomart GMV coming in ahead of expectations.