Given the escalating violence across West Asia, oil and gas stocks continue to be in focus. Reliance Industries, too, has seen some sharp price action. However, JM Financial says the stock price correction is “overdone”.
The stock has dropped 4% this week and 8% in the last one month amid a rise in tension across West Asia. JM Financial, however, maintained a ‘Buy’ rating on Reliance Industries, with a target price of Rs 1,730. This implies an upside of 28.6% from the current market price.
JM Financial on RIL: Correction linked to FII selling
Speaking on the sharp price action, JM Financial listed the key factors affecting the stock price. “We believe the correction in RIL is largely due to FII-related selling, given Reliance Industries is a large liquid holding for FIIs (FII holding of 21.1% at end-December 2025 versus peak of 28.3% at end-March 2021). At CMP, Reliance Industries is trading near our bear-case valuation of Rs 1,275 per share,” said the brokerage.
Resilience of the O2C business to energy price spikes
JM Financial said that Reliance Industries’ Oil-to-Chemicals (O2C) business is not negatively impacted by spikes in crude and LNG prices. Instead, Reliance Industries is positioned to see near-term benefits from a jump in diesel cracks (which could increase Gross Refining Margins by $4-5 per barrel) and a likely rise in petrochemical margins. This is because its petchem feedstock has limited dependency (25%) on crude-linked naphtha, relying more on ethane and off-gases.
“However, we agree this abnormally high diesel crack is not sustainable; also, there could be a risk of the government taking it away via windfall tax (similar to action taken post Russia-Ukraine crisis when the government capped diesel/petrol crack at $20 per barrel and took the margin beyond that via windfall tax),” said the brokerage.
Robust growth in the digital business
JM Financial highlights a 15-16% EBITDA-compounding story for the Digital segment over the next 2-3 years. This growth is expected to be driven by a 10-11% CAGR in Average Revenue Per User (ARPU).
Strong earnings outlook
Despite near-term concerns regarding the retail business due to the ramp-up of quick commerce, JM Financial expects a healthy 14-16% EPS CAGR for Reliance Industries over the next 3-5 years. They believe the recent share price correction has overshot the actual risks, leaving the stock at comfortable valuations.
Significant near-term value triggers
The brokerage house identifies two major upcoming catalysts for the stock: the potential IPO of Jio within the next few months and a telecom tariff hike following the listing.
Financial discipline and debt reduction
The company’s capital expenditure (capex) is expected to moderate to approximately Rs 1.2-1.4 lakh crore per year (down from Rs 2.3 lakh crore in FY23). This moderated capex is projected to be fully funded by internal cash generation, leading to a gradual decline in net debt while maintaining a net debt-to-EBITDA ratio below 1x.
Reliance Industries Q3FY26
Reliance Industries reported a consolidated net profit of Rs 18,645 crore in Q3FY26, compared to a net profit of Rs 18,540 crore in the same period a year ago. On a sequential basis, profit increased marginally by 2.6% from Rs 18.165 crore.
The company’s revenue from operations rose 10.5% YoY to Rs 269,496 crore in Q3FY26 from Rs 2,43,865 crore in Q3FY25. Sequentially, the revenue rose 4% from Rs 258.898 crore.