Reliance Industries: Jefferies Initiates Buy Rating After Announcing Strong Q3 O2C Performance

Synopsis: Reliance Industries’ Q3 FY26 revenue from OTC segment rose to 8.4 percent YoY to Rs 162,095 crore, driven by strong O2C margins, efficient production, and Jio-bp’s expanding fuel and alternative energy volumes.

This article outlines Reliance Industries’ Q3 FY26 performance, strong O2C growth from higher refining margins and fuel demand, Jio‑bp’s expanding volumes and market share, and strategic operational initiatives, along with the brokerage rationale for a Buy rating and a Rs 1,740 target, reflecting upside and resilient earnings prospects.

With a market capitalization of Rs 19,04,018 crore, Reliance Industries Ltd’s share is trading at current levels of Rs 1,407 per share, up by 0.76 percent from its previous day’s close price. The share of this company has given a return of 35 percent over the last five years. O2C Segment Drives Growth on Strong Refining Margins and Fuel Demand

Key Operational Highlights

• Revenue and EBITDA Growth: Reliance Industries’ O2C segment posted revenue of Rs 162,095 crore in Q3 FY26, up 8.4 percent YoY and marginally higher than Q2 FY26. EBITDA rose 14.6 percent YoY to Rs 16,507 crore, with margins improving 60 bps to 10.2 percent, reflecting strong operational performance and cost management.
• Fuel and Domestic Operations: Fuel cracks surged 60–100 percent, above the 5-year average, supporting higher refining margins. A margin-accretive shift from aromatics to fuels and record domestic fuel placement via Jio-bp contributed to growth, with HSD up 25 percent and MS/Petrol up 21 percent, while polymer demand remained steady with a 2 percent increase.
• Operational Efficiency and Headwinds: Ethane cracking continued to deliver efficiency gains over naphtha despite higher costs. However, earnings were partially constrained by elevated feedstock freight rates and weak downstream margins. Overall, strong fuel margins and operational efficiency helped offset these challenges, maintaining healthy quarter-on-quarter growth in the O2C business.
• Operational Volumes and Production Efficiency: In Q3 FY26, total production meant for sale rose to 18.2 MMT, driven by higher transportation fuel and polymer output, while chemicals grew 3.3 percent, reflecting effective conversion of raw inputs into high-margin sellable products.
• Strategic Initiatives Driving Performance: The company focused on refinery maximisation with agile crude sourcing, cost efficiency through optimised fuel and freight management, and product innovation, including new diesel and gasoline grades. These strategies enhanced operational efficiency, offsetting slight throughput dips and supporting stronger financial performance in the quarter.
• What’s Driving Growth in Jio-bp: Jio-bp’s growth in Q3 FY26 was fueled by strong domestic fuel demand, with MS and HSD volumes up 24 percent, CBG/CNG surging 55 percent, and E-Mobility rising 23 percent. Expanded network outlets, high market effectiveness per outlet, innovative products, and loyalty programs have positioned it as a “Preferred Mobility & Convenience Solution Provider.”

Brokerage View

Jefferies is maintaining the Buy rating on Reliance Industries, with a target price of Rs 1,740, citing around 24 percent upside and limited downside risk due to the stock trading below its long-term valuation averages.

Oil-to-Chemicals Margins Supported by Supply Disruptions: Middle East supply disruptions have boosted refining and petrochemical spreads, providing strong support to Reliance Industries’ O2C margins. This favorable environment is expected to sustain healthy profitability through H1FY27, reinforcing the company’s position as a leading integrated energy and chemicals player.

Defensive Play in Volatile Markets: Reliance Industries’ diversified portfolio across energy, petrochemicals, retail, and telecom makes it a defensive investment amid market uncertainty. Stable cash flows from core businesses help cushion volatility, providing investors with consistent earnings visibility even during periods of broader market turbulence.

Higher Consolidated Earnings Outlook: Brokerages have revised FY27 consolidated EBITDA estimates upward by 2 percent, driven by stronger-than-expected O2C performance. While Jio’s telecom EBITDA projections are trimmed due to delayed tariff hikes, Reliance’s overall earnings trajectory remains robust, underpinned by its resilient energy, chemicals, and retail operations.

About the Company

Reliance Industries, India’s largest conglomerate, operates across energy, petrochemicals, retail, and digital services. Its integrated business model, strong refining and petrochemical margins, and rapid expansion in retail and telecom segments position it for robust growth, making it a key player in both domestic and global markets.

On a consolidated basis, the reliance group’s revenue from operations grew by 10 percent to Rs 2,64,905 crore in Q3 FY26 from Rs 2,39,986 crore in Q3 FY25, and EBIDT grew by 5 percent to Rs 46,018 crore in Q3 FY26 from Rs 43,789 crore in Q3 FY25. Accompanied by a net profit growth of 1 percent to Rs 22,290 crore in Q3 FY26 from Rs 21,930 crore in Q3 FY25, resulting in an EPS growth of 1 percent to Rs 13.78 per share in Q3 FY26.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Reliance Industries: Jefferies Initiates Buy Rating After Announcing Strong Q3 O2C Performance appeared first on Trade Brains.