RIL Q2 Earnings Beat Lifts Outlook Despite Brokerages Cutting Price Targets

Refining Strength Sharpens Reliance’s Earnings Outlook, but Retail Remains a Drag

A stronger oil-to-chemicals quarter lifted estimates, while uneven segment performance left brokerages divided on valuation.

O2C profitability drives the quarterly beat

Reliance reported a 32 per cent year-on-year increase in profit after tax to ₹29,250 crore in Q2FY27, while gross revenue rose 27.8 per cent to ₹3.62 trillion. The standout contributor was the oil-to-chemicals (O2C) business, where sharply higher fuel cracks and downstream deltas improved refining profitability. The result was a better-than-expected operating performance and what the report described as best-ever earnings.

That strength matters because changes in refining and downstream margins can materially influence the group’s overall earnings outlook. Jefferies expects O2C profitability to increase in winter, citing damage to refining infrastructure in the Middle East and Russia. That is an analyst expectation, not a guaranteed outcome: the contribution will depend on how industry conditions and commodity markets develop.

Jio supports earnings as Retail falls short

Jio’s earnings before interest, tax, depreciation and amortisation (Ebitda) exceeded estimates, helped by better average revenue per user (ARPU) and margins. Upstream performance was largely range-bound. Retail, by contrast, showed the quarter’s clearest weakness: revenue increased just 1 per cent year on year, while Ebitda declined 10 per cent. A festive-season mismatch and input-cost inflation weighed on the business.

This split explains why stronger group earnings did not translate into uniformly higher valuations from analysts. Emkay Global expects Jio to maintain its trajectory and Retail to recover as festive demand picks up. Those expectations could help if performance improves, but the quarter’s numbers show that a recovery in Retail remains an important part of the outlook rather than an established result.

Higher estimates coexist with lower price targets

Brokerage revisions reflect the uneven picture. Jefferies raised its FY27 and FY28 Ebitda estimates by 6 per cent and 2 per cent, respectively, and set a target price of ₹1,710. It also said the stock traded more than two standard deviations below its long-term average enterprise value-to-Ebitda level, interpreting that gap as a sign of pronounced pessimism.

Dolat Capital raised its FY27 profit estimate by 6.2 per cent but reduced its target to ₹1,635 from ₹1,670, retaining a Buy rating. Emkay lifted its FY27, FY28 and FY29 earnings-per-share estimates by 15 per cent, 8 per cent and 3 per cent, respectively, while lowering its blended target multiple from 13 times to 11.5 times. Its revised September 2027 target was about 8 per cent lower at ₹1,550. Nomura changed its FY27 and FY28 Ebitda estimates by 2 per cent and minus 5 per cent, respectively, reflecting higher O2C estimates and lower Retail forecasts.

The divergence is a reminder that earnings upgrades and valuation changes are not the same thing. Analysts can expect better profits while applying a lower valuation multiple because of weaker Retail performance or greater macro volatility. Reliance shares rose 6 per cent to an intraday high of ₹1,234 on the BSE following the results, but that single-session move does not resolve those longer-term questions.

Key Highlights

• Q2FY27 profit after tax rose 32 per cent to ₹29,250 crore; gross revenue increased 27.8 per cent to ₹3.62 trillion.
• Higher fuel cracks and downstream deltas strengthened O2C refining profitability.
• Jio Ebitda beat estimates, supported by better ARPU and margins; Upstream was largely range-bound.
• Retail revenue grew 1 per cent year on year, but Ebitda fell 10 per cent amid festive timing and input-cost pressure.
• Brokerages raised selected earnings estimates but differed on target prices and valuation multiples.

Investor Note: Reliance’s results strengthen the case for earnings growth led by O2C and Jio, but investors should weigh that against Retail’s weaker performance and the risks flagged by analysts, including adverse commodity or currency moves, competition, delayed monetisation of ventures and policy uncertainty.