Reliance Industries: “Show me” – Morgan Stanley announces price target: RIL can increase market capitalization by USD 100 billion
![Reliance Industries: “Show me” – Morgan Stanley announces price target: RIL can increase market capitalization by USD 100 billion Reliance Industries: “Show me” – Morgan Stanley announces price target: RIL can increase market capitalization by USD 100 billion](https://akm-img-a-in.tosshub.com/businesstoday/images/story/202407/668235adaa384-ril-has-been-a-show-me-story-for-the-past-decade-and-has-seen-significant-market-cap-inflection-on-015052703-16x9.jpg)
Value Creation Journey: Reliance Industries Ltd (RIL) can increase its market capitalisation (M-cap) by up to $100 billion in what Morgan Stanley called its fourth monetisation cycle this century. This will be possible as RIL’s economic cycles change, new cash flow streams emerge and valuation multiples catch up, it said.
“Growth is life,” RIL’s tagline, will remain and the cash flows from this monetization will be simultaneously invested in new energies and new chemicals, the foreign brokerage said, pointing out that Monetization 4.0 is different from previous monetizations as it is supported by the economic recovery, domestic demand and lower competition.
Morgan Stanley said monetisation cycles over the past nearly three decades have delivered two to three times as much value to RIL shareholders, with over $60 billion of market capitalisation being added in each decade.
The key to this was RIL’s market share gains, its complete integration and, most importantly, its ability to exceed investor expectations every time the Mukesh Ambani-led company redesigned its business.
“This monetisation follows the $60 billion investment in 2021-23, which was the shortest investment cycle for RIL since the 1990s. Investments in new energy, retail expansion to take market share from the unorganised sector and restructuring of existing energy businesses provide a long runway to deliver sustained earnings growth beyond the next three years, should ROCE be maintained above 10 per cent,” Morgan Stanley said.
The brokerage firm forecasts a 12 percent annual compounded earnings per share increase for fiscal 24-27, driven by several factors across different industries.
“We factor in recent tariff hikes in telecom, oil prices and refining margins and increase our EPS estimates marginally for 2025, 7 percent for 2026 and 8 percent for 2027. Our target price increases to Rs 3,540 from Rs 3,046. RIL has been a ‘show me’ story over the last decade and has witnessed significant market capitalisation after tapping into new revenue streams such as new energy, higher telecom tariffs/chemical margins,” Morgan Stanley said.
RIL’s valuation multiples have performed differently over the last three investment cycles. Morgan Stanley said RIL’s return on equity (ROE) is likely to be higher than its cost of capital going forward as the company transitions to a more profitable, sustainable and less cyclical growth model due to changes in the business and capital structure.
“We are increasing our multiples (in SOTP) by 0.5x-1x to reflect this monetisation as RIL catches up with domestic and global peers, which have seen a 30 per cent re-rating of multiples over the past year on the back of recovery and monetisation,” it said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are advised to consult a qualified financial advisor before making any investment decisions.
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