RIL earnings in next 2 years should be better than last 2: JPMorgan

With shares of Reliance Industries (RIL) having underperformed over the past year with just a 2% return, global brokerage firm Jefferies said on Thursday that the blue-chip stock has felt the pressure of large earnings cuts, but growth in the consumer business could drive a rally going forward.

JPMorgan's Sanjay Mookim said RIL’s earnings over the next two years should be better than in the previous two, as weaker commodity EBIT is unlikely to recur given the already low margins.

“Consumer business growth should translate better to the bottom line, helping relative performance,” Mookim said in a report, assigning an Overweight rating with a target price of Rs 1,568.

The oil-to-chemicals (O2C) segment now accounts for only a third of RIL’s consolidated EBITDA. JP Morgan noted that the drag from any margin weakness should be lower, and base effects are favorable for retail and telecom in H1/Q1FY26. This, it said, should support near-term earnings growth.

“In the short term, RIL’s relative performance to the Nifty has tended to respond to Nifty relative EPS revisions. The unanticipated weakness in refining and petchem margins drove sharp earnings cuts in FY25—hurting stock performance, in our view,” the report stated.

Reliance Retail and Jio now account for about 54% of RIL's total consolidated EBITDA in FY25.

“On our estimates, these two segments will account for almost all of the net EBITDA growth over the next three years. RIL has operated with materially negative free cash flow over the last three years, driven by telecom spending. As that fades, and with an EBITDA run rate of approximately $20 billion a year, we expect Reliance to generate positive free cash flow—despite elevated capex plans at the New Energy complex, in retail, and in petchem capacity expansions,” JP Morgan added.

Recent company guidance of maintaining net debt to EBITDA below 1x also supports the outlook for positive free cash flow, the brokerage said.

RIL shares rose nearly 2% following the brokerage report, touching an intraday high of Rs 1,454.50 on the BSE.