Mukesh Ambani’s green push for Reliance Industries Ltd (RIL) could result in nearly $60 billion value creation by 2025.
Mukesh Ambani’s green push for Reliance Industries Ltd (RIL) could result in nearly $60 billion value creation by 2025, said analysts at global brokerage and research firm Morgan Stanley. The brokerage firm raised RIL share price target to Rs 2,925 from the previous Rs 2,269, saying that it expects silicon and hydrogen to emerge as next decade’s ‘New Oil’ for Mukesh Ambani’s firm. This translated to a 13% upside from the current price of Rs 2,577 apiece. Reliance Industries, the most valuable private listed company in India, recently unveiled plans to transform its energy business. Mukesh Ambani plans to invest Rs 75,000 crore over the next few years in clean energy.
Stock Talk: RIL share price targets in Morgan Stanley’s bull, bear, base cases
In the base case scenario, Morgan Stanley expects Reliance Industries share price to reach Rs 2,925. In a bull case, RIL share price is expected to soar higher, reaching Rs 3,490. Here APRU is expected to be hiked along with more clarity on the e-commerce business. In the bear case, analysts see RIL stock sliding down to Rs 1,975 per share. Here no recovery in refining margins is expected while increased capex in telecom is predicted along with cash burn in Reliance Retail and New Energy Business.
Redefining New Oil
Morgan Stanley noted that Reliance Industries has redefined ‘oil’ in its strategy during the past decade with data and is looking to repeat the same this decade with a vision to transform India from a net energy importer to a global exporter of clean energy solutions. Currently, oil markets provide a $3 trillion annual total addressable market, with RIL capturing 1.5% of the global oil downstream market. “As some of this TAM shifts over the coming decade, RIL is retooling itself to benefit from this pivot and is focussing on capitalising on silicon and hydrogen,” Morgan Stanley said.
Analysts estimate that the first decade to 2030 alone will require 2,400GW of renewable capacity additions (solar and wind) for the power system globally, with a further ~230GW for green hydrogen possible by 2050. “RIL’s 1.4mbpd fuel output is equivalent to 100GW of electricity generation, i.e., also in line with its target for PV panel sales by 2030,” the report said. RIL’s plan to enter the clean energy space has been termed as different from global peers as Mukesh Ambani moved to provide supporting infrastructure and focusing less on electricity generation.
$60 billion value creation journey
The unique plan envisioned by Mukesh Ambani will see RIL work in the areas related to hydrogen, solar PV, and grid batteries. If successfully implemented, Morgan Stanley analysts believe this could allow the company to stand out as one of the most integrated infrastructure providers in not just India but the world. “As execution and technology-related risks unwind considering RIL’s strong capabilities in manufacturing and technology, we look at the blue sky opportunity in value creation that may lie ahead for long-term investors who are bullish on the energy transition opportunity,” they added. If history has to be relied upon, RIL has a proven track record of delivering in new businesses.