The company, which is in its fourth monetisation cycle in 30 years, will see a re-rating and earnings upgrade in every quarter in 2026, according to the brokerage. This comes on the back of a refining up-cycle in the first quarter, ARPU hike and retail top-line growth in the second, ramp-up of new energy in Q3, and a recovery in chemicals by Q4.
Here’s what’s driving the bullish sentiment
1. Fuel’s ‘Golden Age’ – Fuel refining remains its most underappreciated vertical, delivering the highest returns, strong free cash flows and incremental growth through the expansion of its fuel retail network. Morgan Stanley sees the sector in a ‘golden age’, creating an estimated $7–10 billion in net asset value for RIL. Fuel refining margins, including retail, are currently tracking close to $14 per barrel—around 1.5 times above mid-cycle levels—as the favourable cycle extends into its fourth year in 2026. As additions to global fuel refining capacity continue to lag annual consumption growth of 0.7–0.9 million barrels per day by a wide margin, the brokerage sees a 5–7% upside risk to RIL’s FY27–FY28 earnings estimates.
2.) Retail is Turning the Corner – Its consumer brands business has scaled rapidly over the past three years to reach a size comparable with peers such as ITC’s FMCG business, with over 75% of trade coming from general merchandise. As the business continues to expand, it is expected to be margin and ROCE-accretive for Reliance Retail. Growth is also being supported by quick commerce through JioMart, which recorded 42% quarter-on-quarter growth in the September 2025 quarter by leveraging the existing retail footprint and an expanding network of dark stores to enable deliveries within 30 minutes. The ramp is expected to help drive a recovery in RIL’s retail growth to a 17% CAGR over FY25–FY28.
3.) Telecom a ‘Cash Cow’: The vertical turning free cash flow positive for the first time as capital expenditure moderates, subscriber additions across both broadband and wireless outpace industry growth, and ARPU rises organically despite the absence of tariff hikes over the past two years. RIL is expected to see a comparable inflexion, with Jio Platforms delivering a 9% CAGR in ARPU, translating into 18% growth in EBITDA and earnings. That said, telecom ROCE remains around 7%, reflecting the early-stage monetisation of spectrum and digital assets. Digital EBITDA, however, has already expanded 1.5 times, based on the first-half FY26 run rate of about $0.6 billion.
4.) Chemicals’ Positive Levers: China’s anti-involution drive is likely marking the bottom of the petrochemical cycle, as the pace of new capacity additions slows and an estimated 5–10% of older chemical capacity in the country is shut down. Beyond China, the unwinding of involution is also helping industry margins stabilise, with around 15 million tonnes per annum of olefin capacity no longer operational in 2025. Against this backdrop, Reliance Industries’ margins have fallen by more than a third during the current chemical down-cycle, but the brokerage sees upside risk to Street estimates as margins recover by 10–15% by end-2026.
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Reliance Industries appears to be pricing in only mid-cycle earnings across its existing verticals, even as the monetisation cycle and the redeployment of capital into new growth engines remain underappreciated. This is reflected in the stock trading at a discount of over 60% to peer multiples on a NAV-weighted basis for each division. The brokerage argues that a confluence of key themes collectively adds more than $50 billion to RIL’s net asset value.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)