Reliance Industries share price: CLSA is baffled. It believes the stock market is ignoring the new energy business of Reliance Industries Ltd (RIL) worth $40 billion and said the RIL stock is priced attractively to play triggers in 2025 such as the start of new energy capacities, the return of promising growth in retail, a ramp-up in AirFiber subscribers and a potential Reliance Jio Infocomm initial public offer (IPO).
The foreign brokerage is banking on Reliance's fully integrated 20GW solar Gigafactory, set for launch in 3-4 months. The brokearge believes the RIL stock can rally 70 per cent in the blue-sky scenario. In its base case, it anticipates 30 per cent upside for the oil-to-telecom major.
On Wednesday, the RIL stock fell 1.17 per cent to Rs 1,258.20. The scrip is down 3 per cent year-to-date. CLSA said the RIL Gigafactory is seen benefitting from the firm's tech lead via global partnerships. CLSA derived a solar business value of $30 billion, based on a discount to recently listed peers, yet the Reliance's stock is trading within 5 per cent of its rainy-day valuation, which means the Street is assigning a zero value to the new energy business.
"Our deep dive into project financials suggests an annual solar business Ebitda of $1.7 billion over the next four to five years and a value of over $30 billion, which is at a discount to replacement cost valuation of recently listed Indian solar PV manufacturers," CLSA said.
CLSA said supportive domestic and export environments make for a bright outlook for Indian solar manufacturers.
"We view the stock as offering an attractive entry point to play important catalysts in 2025," it said while assigning 'Outperform' rating and a target of Rs 1,650 on the stock. The RIL stock got ex-bonus recently.
"Expert agencies foresee a 3.5 times jump by 2030 in the installed 1.4TW of solar power generation capacity worldwide as at the end of 2023. Accounting for about 90 per cent of global manufacturing, China dominates e world's supply chain, but significant tariff restrictions on imports of Chinese PV products have opened the lucrative US market for hon-China exporters like India," CLSA said.
It noted that India has also pledged to raise its solar capacity to 280GW by 2030 from the current 91GW, requiring annual installations of 20-50GW going forward. We expect top Indian players to double their module manufacturing capacity in the next three years to 135GW pa with 25-45 per cent being backward integrated enough to also access attractive export markets like the US.
As part of its broader new energy business initiative, Reliance Industries plans to establish a-fully integrated 20GW solar Gigafactory by 2026/27, starting with cell to module capacity this year.
It aims to use its technology lead through a host of acquisitions and JVs with companies like REC Solar, Caelux and others to produce the more advanced HJT technology modules with hopes of further raising its efficiency and/or effective life by using innovations like perovskite among others.