Reliance Industries shares rose 2.5% to ₹1,311 on Tuesday after brokerage firm Jefferies maintained a 'Buy' rating. The firm projects a 33% upside, driven by strong global refining margins in the oil-to-chemicals segment and expected recovery in retail growth. The brokerage highlighted the company’s tax-efficient refinery assets as a key factor supporting future earnings.
Reliance Industries shares moved higher by approximately 2.5% on Tuesday, trading near ₹1,311, following a positive assessment from brokerage firm Jefferies. The brokerage has maintained a 'Buy' rating on the stock, setting a price target of ₹1,710. This target suggests an upside of around 33% from recent levels, based on the firm's analysis of the company's energy and retail segments.
Refining Margins and Global Supply
The bullish view is largely supported by the current state of the global energy market. Jefferies points out that about 4% of global refining capacity is currently unavailable due to geopolitical conflicts and infrastructure issues. With major refining hubs facing outages, fuel inventories in key markets like the U.S. and Europe have fallen to five-year lows. This supply constraint has kept refining margins high, which is a major positive for the company's Oil-to-Chemicals (O2C) segment.
A specific advantage for the company is its tax structure. Because a large portion of its refining capacity is located within a Special Economic Zone (SEZ), the company is largely shielded from the windfall taxes that have impacted other players in the sector. This allows Reliance Industries to keep a larger share of the profits generated during periods of high refining margins.
The Retail Growth Strategy
Beyond the energy business, the brokerage is also focused on the potential of Reliance Retail. The firm expects the retail business to return to mid-teen growth rates, which could help improve the stock's valuation. Currently, the company’s stock is trading at levels lower than its long-term average when compared to its enterprise value and operating profit. Analysts believe that if the retail segment delivers steady growth, it could lead to a re-rating, or a positive adjustment in how the market values the stock.
Risks to Monitor
While the outlook is positive, investors should remain aware of potential risks. The energy sector is highly sensitive to geopolitical tensions, which could disrupt crude oil supply or change the demand outlook unexpectedly. Furthermore, while the company has ambitious plans, there is always an execution risk—the possibility of delays or higher-than-expected costs—regarding its expansion in retail and its shift toward new energy projects. The company's performance also relies on global petrochemical demand, which can be cyclical and prone to slowdowns.
The next important step for investors will be tracking the company’s upcoming quarterly financial results to see if the growth in the retail segment and the margins in the energy business align with these expectations.