Reliance share price jumps 3% today. Is it undervalued after recent correction?
Reliance Industries Limited (RIL) shares rose sharply on Friday after remaining under selling pressure for a long time. The company’s stock was up 3.41% to Rs 1,251.80 on the Bombay Stock Exchange (BSE) at 11:56 am. However, it is still down over 20% compared to its 52-week high of Rs 1,608.95.
Given the situation, it wouldn’t be wrong to say that the RIL stock had been in a slump for a long period. One of the major reasons behind the slump is foreign institutional investor (FII) outflows due to a retail slowdown and weak refining margins.
While the stock has witnessed a period of prolonged correction, it has recovered nearly 6% in recent sessions. And investors are wondering whether it is a good time to buy the stock or avoid it.
IS RIL STOCK UNDERVALUED?
Brokerage firm Jefferies said in a note that the stock is now undervalued, pointing out that RIL’s retail arm is currently valued at just $48 billion, much lower than the $106 billion valuation from its last funding round.
The brokerage has predicted a 15% retail growth recovery in FY26, aided by same-store sales improvements and new store openings.
Additionally, potential triggers such as a Jio IPO, telecom tariff hikes, and better refining margins could drive a turnaround. Maintaining a ‘Buy’ rating, Jefferies has set a target price of Rs 1,660.
It also noted that Jio remains RIL’s bright spot, with a projected 18% revenue CAGR and 22% EBITDA CAGR over FY25-27. Analysts see further tariff hikes and broadband expansion supporting its growth, while steady free cash flow enhances its financial resilience.
SHOULD YOU BUY OR AVOID?
Meanwhile, Kotak Institutional Equities has also upgraded RIL to ‘Buy’ from ‘Add,’ albeit with a lower target price of Rs 1,400.
The brokerage has projected 11% earnings CAGR over FY24-27, despite a minor cut to its EBITDA projections for FY26-27. It expects a gradual retail recovery, alongside catalysts like a potential telecom listing and further pricing revisions in Jio.
It also highlighted that RIL is restructuring its retail segment by shutting down unprofitable stores, particularly from the Future Retail acquisition. This consolidation phase is expected to conclude by FY25, setting the stage for fresh store expansion in FY26-27.
With extreme pessimism largely reflected in its stock price, RIL’s risk-reward profile may now be turning favourable. A continued rebound in Jio, a stabilising retail segment, and a recovery in refining margins could drive a re-rating.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
