Morgan Stanley believes Reliance Industries can add up to $100 billion to its market capitalisation in its fourth monetisation cycle with the help of new stream of cash flows and valuation multiples catching up, a Bloomberg report said, citing a note by Morgan Stanley.
In the last nearly 3 decades, RIL has delivered 2-3x value creation for shareholders, with each decade seeing more than $60 billion in market cap creation.
The global broking firm, which has an ‘overweight’ rating on the stock, raised its target price from Rs 3,046 per share to Rs 3,540. This indicates an over 13% upside in the stock from its current price of Rs 3,120.35.
Morgan Stanley believes “monetisation 4.0” for RIL will be driven by telecom tariff hikes, revenue from new energy business, upcycle in chemicals and back-end integration of retail business.
This is significantly different compared to the company’s previous monetisation cycles when it had heavy reliance on oil and petrochemicals business, and marks a shift towards consumer and technology sectors.
The brokerage has forecast a 12% compounded annual growth in RIL’s earnings per share between FY24 and FY27. The company’s investments in new energy and retail expansion will help it take market share from the unorganised sector, it said.
Morgan Stanley highlighted that RIL’s valuation multiples have behaved differently during each of the past three investment cycles. The company’s return on equity (ROE) is likely to be higher than cost of capital going forward as it transitions to a more profitable, sustainable and less cyclical growth model due to changes in business as well as capital structure.
So far in 2024, RIL shares have risen 20.5%, which is more than double the 10% returns given by benchmark Sensex.
