Morgan Stanley: Reliance Industries Can Add $100 Billion

Morgan Stanley has projected that Reliance Industries Ltd (RIL) could add up to $100 billion to its market capitalisation in its fourth monetisation cycle this century. The foreign brokerage highlights that new cash flow streams and improved valuation multiples are key drivers for this growth.

Distinctive Features of Monetisation 4.0:

The report notes that Monetisation 4.0 differs from previous cycles, as it is buoyed by a business upcycle, strong domestic demand, and reduced competition. Over the past three decades, these monetisation cycles have consistently created 2-3 times value for RIL shareholders.

Morgan Stanley Talks About Recent Investment Cycle:

Morgan Stanley points out that this current monetisation phase follows a significant $60 billion investment made between 2021-2023, which marks the shortest investment cycle for RIL since the 1990s. These investments span new energy, retail expansion to capture market share from the unorganised sector, and the repurposing of existing energy businesses, positioning RIL for sustained earnings growth beyond the next three years, provided the Return on Capital Employed (ROCE) remains above 10%.

Earnings Growth Forecast:

Morgan Stanley forecasts a compounded annual growth rate of 12% in earnings per share (EPS) for RIL over FY24-27, driven by various triggers across different business verticals. The brokerage has updated its EPS estimates, factoring in recent telecom tariff hikes, oil prices, and refining margins, with fractional increases for 2025 and more substantial rises of 7% for 2026 and 8% for 2027.

Morgan Stanley on Price Target and Market Cap Inflection:

Reflecting these factors, Morgan Stanley has raised its price target for RIL to ₹3,540 from ₹3,046. The brokerage describes RIL as a “show me” story over the past decade, noting significant market cap inflections once new revenue streams, such as new energy initiatives, higher telecom tariffs, and improved chemical margins, have been realized.