Reliance Industries: 'Show me' story RIL can add $100 bn value, says Morgan Stanley as it shares stock price target

Value Creation Journey: Reliance Industries Ltd (RIL) can add up to $100 billion to it market capitalisation (m-cap) in what Morgan Stanley described as its fourth monetisation cycle this century. This would be made possible, as RIL's business cycles inflect, new cash flow streams emerge, and valuation multiples catch up, it said.

"Growth is Life", the RIL's tag line, remains in play, and cash flows from this monetisation concurrently are being invested into new energy and new chemicals, the foreign brokerage said noting that monetisation 4.0 is different from previous motetisation as it is supported by the business upcycle, domestic demand, and lower competition.

Morgan Stanley said monetisation cycles have delivered 2-3 times value creation for RIL shareholders in the past nearly three decades, with each decade seeing $60 billion-plus in m-cap creation.

Key to this has been RIL's market share gains, complete integration, and most importantly, ability to execute above investor expectations each time the Mukesh Ambani-led company has re-imagined its business.

"This monetisation follows the $60 billion in investments in 2021-23, which was the shortest investment cycles since 1990s for RIL. Investments made in new energy, retail expansion to take market share from the unorganised sector, and repurposing of existing energy businesses provide a long runway to deliver earnings growth consistently even beyond the next three years should ROCE be sustained above 10 per cent," Morgan Stanley said.

The brokerage has forecast a 12 per cent earnings per share (EPS) growth, compounded annually, over FY24-27 with multiple triggers across verticals.

"We reflect recent telecom tariff hikes, oil prices, and refining margins, and raise our EPS estimates fractionally for 2025, by 7 per cent for 2026, and by 8 per cent for 2027. Our price target rises to Rs 3,540, from Rs 3,046. RIL has been a "show me" story for the past decade and has seen significant market cap inflection once new revenue streams such as new energy, higher telecom tariffs/chemical margins have been delivered," Morgan Stanley said.

RIL valuation multiples have behaved differently across each of the past three investment cycles. Morgan Stanley said RIL’s return on equity (ROE) i likely to be higher than cost of capital going forward as it is transitioning to a more profitable, sustainable, and less cyclical growth model due to changes in business as well as capital structure.

"We raise our multiples (in SOTP) by 0.5-1 time to reflect this monetisation as RIL catches up with domestic and global peers that have seen the business upcycle and monetisation re-rate multiples by 30 per cent in the past year," it said.