On Monday, UBS reiterated its Buy rating on Reliance Industries (RIL:IN) stock with a price target of INR3,420.00. The firm forecasts Reliance's second-quarter fiscal year 2025 EBITDA at Rs389 billion, marking a 5% decrease year-over-year and maintaining the same level as the previous quarter.
This projection accounts for a decline in the Oil to Chemicals (O2C) segment earnings, which is expected to be balanced by stronger performances in consumer-driven sectors, particularly Digital services.
The strength in Reliance's Digital (Jio) and Retail sectors is anticipated to continue, with EBITDA growing by 12% and 8% year-over-year and quarter-over-quarter, respectively. These sectors are projected to contribute 54% to the segment's EBITDA, up from 50% in the first quarter.
The increased contribution from Digital and Retail reflects the company's shifting earnings profile, with these consumer businesses becoming a more significant part of the conglomerate's financial picture.
Despite the robust growth in Digital and Retail, the O2C segment is expected to see a moderation in earnings quarter-over-quarter, attributed to lower refining and petrochemical spreads. This moderation in the O2C segment is a key factor in the overall earnings forecast.
UBS estimates that Reliance's consolidated Profit After Tax (PAT) will reach Rs149 billion for the quarter, which would represent a 14% decline compared to the same period last year and a 2% decrease from the previous quarter. This anticipated dip in PAT aligns with the mixed performance across the company's diverse portfolio, with some areas showing growth while others face headwinds.
The firm's maintained price target and rating indicate a continued positive outlook on Reliance Industries despite the expected fluctuations in different segments of the business. The company's performance in its consumer sectors, especially Digital and Retail, is seen as a strong counterbalance to the challenges faced in the O2C division.
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