Bernstein in its latest note on Reliance Industries (RIL) said the clean energy business of the Mukesh Ambani-led company is probably worth Rs 200 per share but it has plenty of scope for expansion overtime. Bernstein believes RIL can potentially achieve $10 billion in revenue from clean energy, which would represent 40 per cent of the total addressable market (TAM). By 2030, it estimates RIL to capture 60 per cent of solar, 30 per cent of battery and 20 per cent of hydrogen TAM. Net-net, Bernstein sees clean energy including solar, battery, electrolyzers and fuel cells as a new growth pillar for RIL with $2 trillion in investment in India through 2050. For now, the brokerage has a target of Rs 3,020 on the stock. The target suggests a potential 20 per cent upside over Tuesday's closing price of Rs 2,520.40.
Bernstein noted that RIL plans to have 100GW of installed solar power, which would be 35 per cent of India's targeted capacity of 280 GW but represents 50 per cent of incremental share. Bernstein expects EV penetration would reach 5 per cent for personal and commercial vehicles and 21 per cent for two-wheelers. "Clean energy could have a TAM of $30 billion in 2023 (currently $10 billion). By 2050, we believe the TAM could reach $200 billion and cumulative spending of $2 trillion," it said. Bernstein said funding is not an issue for RIL, given the current balance sheet and free cash flow (FCF). It noted that Reliance is targeting to fund future capex from OCF and maintain net debt to Ebitda of less than 1 time (0.6 times in FY23). FCF will turn positive in FY24 and reach Rs 1 lakh crore by FY27, Bernstein said. On O2C business, Bernstein said the company continues to benefit from cheaper Russian crude feedstock while product prices remain strong. Urals are trading at 20-25 per cent discount to Dubai oil price, yielding an additional $6-8 billion spread on refining margin. We estimate O2C can achieveFY24 Ebitda of Rs 63,000 crore, which is in line with market estimates.
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