After the recent rally, Morgan Stanley sees more steam in Reliance Industries

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Global brokerage firm Morgan Stanley is bullish on oil-to-telecom behemoth Reliance Industries, citing the company’s plans to transform its energy business with an over-arching strategy to offer decarbonisation solutions globally at a competitive price in a market potentially worth $5 trillion by 2030. The overseas financial firm has set a target price of Rs 2,925 for RIL. On the other hand, shares of the company scaled their fresh record high of Rs 2,623 on October 6.

Reliance Industries plans to create four giga-factories offering the entire spectrum of renewables/ distributed energy solutions, as it capitalises on India’s quartz and silicon resources. Morgan Stanley added that the company’s focus on the hydrogen value chain offers significant opportunities to decarbonise energy operations, compliment energy storage with batteries and potentially export green ammonia.

“RIL’s approach is unique in that it is taking a leaf from European oil majors to become an enabler of electrons, with less focus on producing them, and like US majors it will focus on synergistic decarbonisation areas (with existing operations), such as carbon capture, hydrogen and even biofuels. The plan would make RIL the largest renewable infrastructure producer with the potential to become an alternative technology supplier to the globe, within the current geopolitical setup, similar to how RIL exports high-grade refinery fuels,” Morgan Stanley said.

In the last decade, RIL investments in technology drove around $125 bn in value creation from scratch. “We see investment in green energy infrastructure is key to outperformance in the next decade. We expect silicon and hydrogen to emerge as the next decade’s ‘New Oil’ for RIL, with potentially up to $60 bn in value creation if things fall into place by 2025,” Morgan Stanley said in a report.

However, considering the large domestic market and global focus on diversifying the sourcing of solar panels and batteries, the hurdle for RIL to take market share is not as high, but cost competitiveness against China is key. The brokerage believes that the adoption of untested technologies like liquid metal and quickly falling hydrogen electrolysers prices are other challenges.