Jefferies Slashes Reliance Target; Retail Faces Headwinds, Buy Rating Held

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AuthorAnanya Iyer|Published at:
Jefferies Slashes Reliance Target; Retail Faces Headwinds, Buy Rating Held
Overview

Reliance Industries' Q3 results showed consolidated EBITDA growth of 5%, missing Jefferies' expectations. The brokerage trimmed its target price to ₹1,795, citing a slowdown in the retail segment impacted by promotions and competition. Despite these challenges, Jefferies maintains a 'Buy' rating, projecting a 23% upside potential for the stock, with growth in Jio and the oil-to-chemical segment cited as key positives.

Retail Segment Headwinds

Reliance Industries' consolidated EBITDA growth of 5% in Q3 FY26 fell below Jefferies' forecasts. The retail segment's performance was particularly scrutinized, with growth reportedly 4% lower than anticipated. Reliance Retail saw only 2% year-over-year EBITDA growth, a slowdown attributed to factors including a shift in the festive season, the hive-off of its FMCG business (RCPL), and aggressive promotional activities in a competitive market.

Oil-to-Chemical Outlook

The oil-to-chemical (O2C) segment outlook remains firm, aligning with global refining trends. Jefferies highlighted that geopolitical impacts on European refining infrastructure and the EU's ban on Russian refined product imports effective January 21, 2026, are likely to support gross refining margins through FY27. While petrochemical overcapacity is expected to persist, accelerated closure of facilities could offer some margin recovery from current lows.

Jio's Steady Trajectory

Jio's revenue and EBITDA performance met expectations, according to Jefferies, as the company awaits regulatory approval for new IPO rules. The brokerage projects Jio's Average Revenue Per User (ARPU) to increase at a 13% CAGR to ₹271 by FY28, driven by anticipated tariff hikes in June 2026 and June 2027. Jefferies forecasts Jio will achieve 20% annual revenue growth and 24% EBITDA growth on a compounded basis over FY26-FY28.

Stock Performance and Future Catalysts

Reliance Industries' share price has experienced a 7% decline over the past month, though it remains up 2% over six months and 12% over the last year. The brokerage firm identifies a revival in retail growth and forthcoming tariff increases in Jio as the primary factors that will drive the stock's performance going forward. Jefferies' maintained 'Buy' rating suggests a potential 23% upside from current trading levels.

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