The Reliance Industries share price has been in focus. The quarterly MSCI index rejig cut down weight for the Mukesh Ambani-led oil-to-new energy major but Jefferies is bullish on the stock. This is because refineries in two major regions have slowed down at the same time, and that’s tightened fuel supplies across the world.
One Indian company happens to be well placed to benefit from it – Reliance Industries.The brokerage house Jefferies expects the company’s Oil-to-Chemicals (O2C) business to remain a key support for earnings in FY27.Jefferies has retained its ‘Buy’ rating on Reliance Industries with a target price of Rs 1,710. This translates to an upside potential of 33% from current market price. It expects consolidated EBITDA to grow at a 10% CAGR between FY26-29.
Let’s take a look at the key factors investors need to watch and why the brokerage is bullish on this stock –
Global refinery disruptions change the equation
The ongoing conflicts have disrupted a sizeable portion of global refining capacity. According to Jefferies, around 4% of global refinery throughput has been lost.
The Middle East alone has seen refinery run cuts of around 2.5 million barrels per day since the conflict began. Around 1.5 million barrels per day is linked to the Strait of Hormuz blockade, while another 1 million barrels per day is due to physical damage.
Russia has also faced around 1.5 million barrels per day of refinery run cuts over the past year.
Fuel inventories are flashing a warning
European diesel inventories and US gasoline inventories have fallen to five-year lows, according to Jefferies. This suggests that the global demand-supply balance remains tight.
At the same time, diesel and gasoline cracks have climbed sharply. Diesel cracks are around $70 per barrel, while gasoline cracks stand at $47.3 per barrel.
Singapore Gross Refining Margin (GRM), a key indicator of refining profitability in Asia, averaged $21.2 per barrel in the second quarter of FY27 to date.
“Diesel, gasoline inventories at 5-year lows,” added Jefferies report.
The brokerage expects this tightness to continue through calendar year 2026.
Why Reliance could benefit
Reliance has a major advantage here. Its refinery in the Special Economic Zone (SEZ), which accounts for most of its refining capacity, is not subject to the current windfall taxes.
That means the company can potentially capture more of the benefit from stronger refining margins.
Jefferies expects the strength in refining to support Reliance’s O2C earnings in FY27.
The brokerage also believes the disruption may not disappear quickly. Some severely damaged Middle Eastern refineries could require four to six months for repairs. Russian refinery outages could also continue depending on the intensity of attacks.
Petrochemicals add another layer
Petrochemical spreads have also strengthened. Two major petrochemical facilities in Iran and two large facilities in Saudi Arabia have suffered damage.
Middle Eastern naphtha exports to North-East Asia have also been disrupted.
Jefferies estimates average petrochemical margins across polyethylene (PE), polypropylene (PP) and polyethylene terephthalate (PET) are up 64% in the second quarter of FY27 to date compared with the end of February.
Is the stock valuation offering a cushion?
The brokerage says Reliance Industries trades more than one standard deviation below its long-term average Enterprise Value-to-EBITDA (EV/EBITDA) valuation, “Stock trades > 1 SD below the long-term average suggesting favourable risk-reward.”
Jefferies expects growth to return to the mid-teens, which could support a re-rating of the stock.
Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This 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 before making any investment decisions.