Reliance to see recovery in 2025, driven by telecom, retail and refining: Bernstein

According to the report, the recovery will be driven by sectors such as telecom, retail, and refining which are expected to show a major growth and improved performance metrics in the coming time.

Reliance stock declined 25 per cent from its peak in mid-July sharply reversing the strong performance in the first half of financial year 2024.

In 2025, the recovery will be led by an expected 12 per cent increase in Jio's Average Revenue Per User (ARPU) without tariff hikes and subscriber growth of 4-5 per cent.

The retail operations are also expected to rebound, achieving double-digit EBITDA growth, which gives strength to the RIL.

In refining, Gross Refining Margins (GRMs), which declined to USD 9 per barrel in financial year 2024, are expected to recover, contributing to overall earning growth of the conglomerate.

The report highlights the valuation of the company, noting that its current trading multiple of 10.1x forward EV/EBITDA represents a 17 per cent discount to its three-year average.

With earnings expected to grow 19 per cent or more in FY26, Bernstein has revised its target price for RIL to Rs 1,520, implying a potential upside of 25 per cent.

The report added that the Reliance Jio will be major driver of RIL's recovery, with revenue growth projected at a compound annual growth rate (CAGR) of 17% over the next three years.

By FY26, ARPU is expected to rise by over 14 per cent, and Jio's subscriber base is anticipated to reach 500 million, securing a 48 per cent revenue market share. The report highlighted that the downward Capital expenditure of Jio further supporting its profitability, giving support to RIL.

As per the report, the RIL's retail segment is expected to recover from challenges faced in the last year, post the store rationalisation. It anticipates a return to 15 per cent growth by FY26, supported by normalized capital expenditure and enhanced revenue per square foot.

The report added that refining business, which faced pressure from declining GRMs in FY24 has started a reverse trend. GRMs are expected to improve by 5.4 per cent year-on-year in FY26, benefiting from a weaker Indian rupee.

The company will benefit by its new investments in the energy segments, buillding solar and battery capacity.

RIL is planning to use 20 GW of panel manufacturing for internal use and produce green H2 in 2025 and getting to 50 GWh of cell to pack battery manufacturing in 2027.

Reliance gigacomplex will be the largest end to end renewable energy manufacturing. Reliance is prioritising building a battery gigafactory by 2026, fast-tracking sodium iron technology at a megawatt level by 2025, as per the report.

RIL signed first PPA for 128MW for 25 years and signed an MOU with Maharashtra government for 100kTPA GH2 production (investment of USD1.8bn) which will benefit the company in public markets, the report stated.

Bernstein values RIL using a sum-of-the-parts methodology, factoring in growth across its key segments.

The telecom division, represented by Jio, is valued at 12x its forward EV/EBITDA, while the retail segment is assessed across core and non-core operations. Refining and petrochemical segments are valued at 7x FY26 EV/EBITDA.

With a steady-state EBITDA of USD 22 billion projected between FY25-27, Bernstein highlighted RIL's potential to generate strong free cash flow and deliver solid returns for investors. (ANI)