Reliance Q2 Review: Revival In O2C Expected, Growth To Be Led By New Energy

Reliance Industries Ltd. is on course to see a growth revival from the second half of the financial year, driven by refining and new energy verticals, analysts said as its September-quarter profit met estimates.

The oil-to-telecom conglomerate's retail division has witnessed a surge in demand from October 2024 in fashion and lifestyle, owing to festive season, Systematix Institutional Equities said in a report.

The stimulus in China and strong domestic demand are expected to bring a revival in O2C margins in the second half of fiscal 2025, the brokerage said.

The Mukesh Ambani-led conglomerate reported its second-quarter results, with a net profit rise of 11% to Rs 19,323 crore for the quarter ended Sept. 30, 2024. This profit figure aligned with the consensus estimates of analysts polled by Bloomberg.

Morgan Stanley expects triggers for the stock emerging in 2025 from both refining and the retail vertical—when revenue growth comes back. "The stock is pricing in no recovery from the current challenges and enterprise value to invested capital of 1.3 times looks undemanding."

The brokerage said that the management focuses on margin improvement and streamlining operations in consumer retail for the next two quarters. "Growth recovery is two quarters away."

Systematix upgraded the stock to 'buy' with a target price of Rs 3,145 per share, implying an upside of 14.6%. Morgan Stanley maintained an 'overweight' rating with a target of Rs 3,325 apiece, a 21% upside from the previous close.

Reliance is rapidly nearing its new energy vision rollout, bagging several PLIs on the way, Nuvama said in a note.

The conglomerate at its AGM had highlighted a potential 50%-plus addition to earnings in five-seven years by NE business, which shall equal O2C’s profitability, Nuvama said. RIL’s new energy rollout shall unleash the next leg of growth besides conventional businesses, the brokerage said.

It has retained ‘buy’ with a target price of Rs 3,650 per share, implying an upside of 32%.