The recent surge in crude prices has put the focus on oil and gas stocks. The share price of Reliance Industries is under pressure today, but Jefferies expects the stock to be relatively resilient despite market volatility. The brokerage maintained a ‘Buy’ rating on the stock with a price target of Rs 1,750, implying around 26% upside from the current levels.
Jefferies said the company’s oil-to-chemicals (O2C) business is currently benefiting from supply disruptions in the Middle East, which have pushed up refining and petrochemical spreads. However, the brokerage has also trimmed some estimates for the telecom business due to a delay in expected tariff hikes.
Here’s a closer look at Jefferies’ investment rationale for Reliance.
Middle East supply disruptions boosting O2C margins
Jefferies said supply disruptions triggered by the blockade of the Strait of Hormuz have tightened global supplies of crude and refined products, particularly in Europe and Asia. With no strategic reserves of refined products globally, restoring supplies quickly may be difficult.
As a result, refining and petrochemical spreads have surged sharply. The brokerage estimates that refining margins and petrochemical spreads have risen significantly since the conflict began and expects elevated spreads to persist for the duration of the disruption.
Petrochemical feedstock shipments from the Middle East have also been hit, forcing several Asian producers to cut production or shut facilities. As per the report, this has further tightened supply and supported product spreads.
Reliance may maintain operations despite higher freight costs
Despite higher freight costs linked to the disruption, Jefferies believes Reliance is relatively well-positioned. The brokerage noted that the company can continue operating at high utilisation levels because it has access to Russian crude and can source oil through routes outside the Middle East.
Reliance’s plans to invest in a greenfield refinery in the US could also help it secure additional crude supply from regions such as the US and Venezuela over the longer term, according to the report.
Jio tariff hikes likely delayed
While the O2C segment is seeing stronger margins, Jefferies has reduced its estimates for Reliance’s telecom arm, Jio. The brokerage now expects tariff hikes to be pushed back from June 2026 to December 2026.
Two factors are driving this change. First, rising energy prices could increase inflation, potentially limiting telecom operators’ ability to raise tariffs. Second, the final government notification on minimum public shareholding rules for large IPOs is still awaited, which could delay the timeline for a potential Jio listing.
Even so, Jefferies expects Jio to deliver strong growth, forecasting revenue and EBITDA to grow at a compound annual rate of about 16% and 20%, respectively, between FY26 and FY28.
Earnings outlook improved despite telecom revisions
The brokerage said stronger refining and petrochemical margins could offset the softer outlook for telecom in the near term.
Jefferies has therefore raised its FY27 consolidated EBITDA estimate by about 2%, assuming that elevated refining and petrochemical spreads continue into the early part of the financial year before gradually normalising.
According to Jefferies, Reliance’s valuation also provides some downside protection. The stock currently trades about one standard deviation below its long-term average forward EV/EBITDA multiple, suggesting that much of the near-term risk may already be priced in.
The long-term growth story remains intact
Over the longer term, the brokerage sees multiple growth engines for Reliance, including telecom, retail and new energy initiatives.
Jefferies said investments made in consumer businesses such as telecom and retail have already created significant equity value, while new businesses such as renewable energy could emerge as additional growth drivers in the coming years.
Interestingly, another leading domestic brokerage house, Motilal Oswal, has also reiterated Buy on this Index heavyweight with a similar price target.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.