Kotak Institutional Equities has upgraded Reliance Industries (RIL) to ‘Buy’ with a target price of ₹1,400, citing an attractive risk-reward after a 22% decline in the stock over the past year. The downgrade in earnings was driven by subdued retail performance and weak refining margins due to increased sanctions on Russia and potential US reciprocal tariffs.
Key Takeaways:
- Retail segment downturn nearing an end: The store rationalization phase in Reliance Retail is expected to conclude soon, leading to a recovery in revenue growth.
- Earnings revision: FY26/27 EBITDA estimates have been reduced by 1-3%, but despite the cut, expect an 11% CAGR in earnings over FY24-27.
- Upcoming catalysts:
- A likely IPO of Jio and further telecom tariff hikes
- Gradual improvement in the O2C business
- Retail business recovery expected in the coming quarters
The report concludes that Reliance’s significant stock correction has made the risk-reward attractive, with a turnaround expected in retail and key triggers in telecom and refining ahead.
