New Delhi [India], In its fourth monetization cycle this century, Reliance Industries (RIL) is projected to reach up to $100 billion in value creation, according to a research report by US multinational investment bank and investment firm. Morgan Stanley financial services.
The report suggests that with this level of value creation, as economic cycles change, new cash flows emerge and multiples catch up, RIL's share price could rise to Rs 3,540.
Morgan Stanley report has set a base target of Rs 3,540 for RIL, with a potential hike to Rs 4,377 in a bullish scenario. The financial services company attributes these positive outlook to the expected strong growth momentum at RIL.
The report highlights that RIL's fourth monetization cycle is expected to add between $60 billion and $100 billion to the company's market capitalization.
This latest cycle, "Monetization 4.0," is distinguished by its foundation in a favorable business growth cycle, strong domestic demand, and reduced competition.
The report adds that the simultaneous cash flows generated from this monetization phase are being strategically reinvested in emerging sectors such as new energy and chemicals.
Morgan Stanley notes that these investments, along with the expansion of RIL's retail operations to capture market share from the unorganized sector and the repurposing of existing energy businesses, provide a substantial path to sustained earnings growth.
In the base case, Morgan Stanley has increased its target price for RIL to Rs 3,540 per share, up from the previous target of Rs 3,046. This valuation is obtained using a sum-of-parts methodology.
Revised EBITDA (earnings before interest, taxes, depreciation and amortization) forecasts for fiscal years 2025 to 2027 have been adjusted upward by 1 to 6 percent, reflecting higher profitability in the telecom sector and refining margins. However, these gains are slightly offset by a more gradual growth trajectory in retail.
In terms of the company's domestic exploration and production (E&P) operations, the report used a forward EV/EBITDA (enterprise value) multiple of 6.0 times, an increase from the previous 5.5 times. This adjustment is due to the stabilization of gas production and the reduction of execution risks.
Similarly, the forward EV/EBITDA multiple for RIL's retail business has been increased to 33x from 32x to align with higher multiples of industry peers. Assessing the e-commerce segment, specifically Jiomart, the report highlights the sales growth potential.
Morgan Stanley says growth prospects for RIL's retail division remain strong, driven by growing demand and continued expansion of the company's stores.
The company's 66.43 percent stake in digital investments is valued at an implied EV/EBITDA multiple, with the telecom vertical's target multiple raised to 11.0 times from the previous 9.5 times to reflect the multiples. taller than their peers.
Additionally, the report assessed the new energy business using an EV/invested capital multiple, reflecting the company's growing investments and successful acquisition of production-linked government incentives for a 6 GW integrated solar supply chain. (Giga Watt) and a battery production of 5 GW.
Morgan Stanley incorporates estimated net debt for fiscal 2025 to account for annual investments of $16 billion. The report indicates that the company's investments are valued based on reported book values and recent acquisitions.
In the bullish scenario, the target value of RIL stock increases to Rs 4,377, as against the previous projection of Rs 3,696, while in the bearish scenario, the stock price is expected to rise to Rs 2,573 from the previous projection of 2,204 rupees.
The report suggests that with this level of value creation, as economic cycles change, new cash flows emerge and multiples catch up, RIL's share price could rise to Rs 3,540.
Morgan Stanley report has set a base target of Rs 3,540 for RIL, with a potential hike to Rs 4,377 in a bullish scenario. The financial services company attributes these positive outlook to the expected strong growth momentum at RIL.
The report highlights that RIL's fourth monetization cycle is expected to add between $60 billion and $100 billion to the company's market capitalization.
This latest cycle, "Monetization 4.0," is distinguished by its foundation in a favorable business growth cycle, strong domestic demand, and reduced competition.
The report adds that the simultaneous cash flows generated from this monetization phase are being strategically reinvested in emerging sectors such as new energy and chemicals.
Morgan Stanley notes that these investments, along with the expansion of RIL's retail operations to capture market share from the unorganized sector and the repurposing of existing energy businesses, provide a substantial path to sustained earnings growth.
In the base case, Morgan Stanley has increased its target price for RIL to Rs 3,540 per share, up from the previous target of Rs 3,046. This valuation is obtained using a sum-of-parts methodology.
Revised EBITDA (earnings before interest, taxes, depreciation and amortization) forecasts for fiscal years 2025 to 2027 have been adjusted upward by 1 to 6 percent, reflecting higher profitability in the telecom sector and refining margins. However, these gains are slightly offset by a more gradual growth trajectory in retail.
In terms of the company's domestic exploration and production (E&P) operations, the report used a forward EV/EBITDA (enterprise value) multiple of 6.0 times, an increase from the previous 5.5 times. This adjustment is due to the stabilization of gas production and the reduction of execution risks.
Similarly, the forward EV/EBITDA multiple for RIL's retail business has been increased to 33x from 32x to align with higher multiples of industry peers. Assessing the e-commerce segment, specifically Jiomart, the report highlights the sales growth potential.
Morgan Stanley says growth prospects for RIL's retail division remain strong, driven by growing demand and continued expansion of the company's stores.
The company's 66.43 percent stake in digital investments is valued at an implied EV/EBITDA multiple, with the telecom vertical's target multiple raised to 11.0 times from the previous 9.5 times to reflect the multiples. taller than their peers.
Additionally, the report assessed the new energy business using an EV/invested capital multiple, reflecting the company's growing investments and successful acquisition of production-linked government incentives for a 6 GW integrated solar supply chain. (Giga Watt) and a battery production of 5 GW.
Morgan Stanley incorporates estimated net debt for fiscal 2025 to account for annual investments of $16 billion. The report indicates that the company's investments are valued based on reported book values and recent acquisitions.
In the bullish scenario, the target value of RIL stock increases to Rs 4,377, as against the previous projection of Rs 3,696, while in the bearish scenario, the stock price is expected to rise to Rs 2,573 from the previous projection of 2,204 rupees.
