Whalesbook
Brokerage Adjusts Outlook on Q4 Performance
Motilal Oswal's assessment following Reliance Industries Ltd.'s (RIL) Q4 fiscal year results has led to a slight adjustment in its outlook. The firm lowered its price target for RIL by 3% to ₹1,655, reflecting near-term pressures observed in the energy segment that influenced earnings expectations. Despite this target trim, the brokerage maintains a strong conviction with a reiterated 'Buy' rating, highlighting potential for a substantial 25% stock upside. This optimism is anchored in the projected growth of Reliance Retail and the anticipated initial public offering (IPO) of Joint Pictures Limited (JPL).
Financial Highlights and Capex
For the fiscal year 2026, RIL's consolidated earnings before interest, taxes, depreciation, and amortization (Ebitda) increased by 8% year-over-year to ₹1,78,900 crore. However, adjusted attributable profit after tax (PAT) showed more moderate growth of approximately 3% to ₹71,900 crore, impacted by elevated interest and depreciation expenses. Committed capital expenditure rose about 10% year-over-year to ₹1,44,300 crore, while cash capex moderated by approximately 12%. Notably, capital expenditure by Reliance Jio Infocomm Ltd. (RJio) saw a reduction.
Debt and Cash Flow Dynamics
RIL's calculated debt, including spectrum liabilities and creditors, increased by roughly ₹5,800 crore in FY26, reaching an estimated ₹2,81,800 crore. Consolidated free cash flow for FY26 improved to ₹40,600 crore, aided partly by the sale of its stake in Asian Paints. Excluding other income and interest, RIL's consolidated free cash flow demonstrated a significant turnaround, improving to approximately ₹18,000 crore from a substantial outflow in the prior year. This improvement was largely driven by enhanced free cash flow generation from RJio.
Future Growth Catalysts
Motilal Oswal forecasts a compound annual growth rate (CAGR) of 9-10% for RIL's consolidated Ebitda and adjusted PAT over the fiscal years 2026 to 2028. Key factors identified as potential triggers for upward stock movement include sustained mid-to-high teen growth in Reliance Retail, the possibility of a tariff hike for RJio services, and the upcoming initial public offering (IPO) of Joint Pictures Limited (JPL). These catalysts are expected to drive significant value for RIL shareholders.