Reliance share price: Goldman Sachs sees 31% upside potential amid promising growth outlook

Reliance Industries Limited (RIL) has faced significant stock price fluctuations over the past year, with a decline of over 22 per cent from its peak of ₹1,608.95 in July 2024. However, global brokerage Goldman Sachs maintains a bullish stance on the stock, reiterating its 'Buy' rating with a price target of ₹1,640 per share, indicating a 31 per cent upside from current levels.

The oil-to-telecom giant has seen a 15 per cent decline in the last year but showed signs of recovery in March, gaining over 6 per cent after a 5 per cent drop in February. In January, too, RIL’s stock price saw a 4 per cent increase. Goldman Sachs attributes this volatility to sectoral challenges but remains confident about the company’s long-term growth trajectory.

What to expect from RIL Q4 results?

Goldman Sachs expects RIL’s core EBITDA to remain largely flat on a sequential basis in Q4FY25. However, the key investor focus is likely to be on the retail segment’s growth trends. Additionally, Jio's revenue is projected to grow 4 per cent quarter-on-quarter, approximately 200 basis points faster than Bharti Airtel’s expected growth.

Goldman Sachs also expects an update from RIL regarding its retail expansion plans for FY26 and developments in its new energy ventures. The company has previously indicated that solar module production is set to begin by the end of CY24, with 30GWh battery production expected in the second half of CY25.

RIL's Energy Segment Outlook

Goldman Sachs expects RIL’s energy EBITDA to decline sequentially in Q4 due to weaker refining and petrochemical margins. Refining margins have been impacted by lower Singapore product cracks and higher crude premiums in Asia. The tightening of US sanctions on Russian oil shifted Middle Eastern crude sourcing, pushing the Dubai-Brent differential to a USD 2.0/bbl premium in Q4 from a USD 1.0/bbl discount in Q3. Saudi official selling prices (OSPs) also rose to USD 1.7/bbl from USD 1.3/bbl.

Despite near-term challenges, Goldman Sachs maintains a positive medium-term outlook, expecting nearly 1.0 mb/d of global refining capacity to shut down permanently by CY25E, supporting margins. However, petrochemical margins may take longer to recover due to supply-demand imbalances. RIL’s cost advantage from lower US ethane gas prices should help it outperform peers.

Jio Outlook

Jio is set to benefit from rising tariffs and strong fixed wireless access (FWA) adoption. The company’s 4QFY25 revenue is forecasted at ₹305 billion, reflecting a 4 per cent sequential and an 18 per cent annual growth. Wireless revenues are expected to rise 15 percent YoY, with a net addition of 3.3 million subscribers in 3QFY25. Analysts anticipate an acceleration in subscriber growth across wireless and fixed broadband, supported by tariff hikes and FWA expansion. Jio’s ARPU is projected to reach ₹209 by March 2025, benefiting from these structural tailwinds.

Goldman Sachs also highlights Jio’s growing AI ecosystem, particularly its investments in OpenAI and other AI ventures, as key long-term value drivers.

Retail Business Outlook

Retail business growth is expected to continue improving, with ex-connectivity sales estimated to grow 6.5 per cent YoY in 4QFY25, building on the sequential recovery from 5.7 per cent in 3QFY25. This growth is primarily driven by the restructuring of the grocery segment and an increased focus on fashion, including the expansion of new brands like Yousta. While the quarter has one fewer trading day than the previous year, a steady improvement in margins is anticipated as business rationalization efforts take effect.

RIL’s Valuation Discount Narrows, Earnings Growth Expected in FY26

Goldman Sachs notes that while RIL’s net asset value (NAV) discount has moderately improved, it remains wide relative to historical averages. The brokerage attributes this to muted EBITDA growth in FY25 and a continued earnings downgrade cycle, driven by slower retail expansion and low margins in refining and petrochemicals over the last three quarters.

Looking ahead, Goldman Sachs forecasts an 18 per cent earnings growth in FY26, driven by three key factors: a 12 per cent recovery in retail EBITDA (excluding connectivity) amid operational restructuring and improving macroeconomic conditions, a 24 per cent earnings acceleration in Jio, supported by a likely tariff hike in 2HCY25, and an improvement in refining margins as approximately 1.0 mb/d of global refining capacity is expected to close permanently by CY25E.

The brokerage sees a favorable risk-reward opportunity, with RIL’s stock trading near one standard deviation below its historical forward EV/EBITDA mean and close to its bear-case scenario valuation.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.