The stock of Mukesh Ambani-led Reliance Industries (RIL) recorded fresh highs on Thursday with the company’s market capitalisation nearing ₹19 lakh crore. 

RIL recorded a fresh 52-week high of  ₹2,788.80 on the BSE. It closed at ₹2,782.15, up ₹63.75 or 2.35 per cent. It opened at ₹2,759 as against the previous close of ₹2,718.40.

The oil-to-telecom conglomerate’s market capitalisation stood at ₹18,82,104.45 crore on the BSE.

The stock closed at ₹2,782.00 on the NSE, up ₹63.55 or 2.34 per cent, after recording a fresh year-high of ₹2,789.

The index heavyweight RIL has been gaining momentum over the past few sessions.

Blueprint for the future

RIL Chairman and Managing Director Mukesh Ambani last year announced plans to unveil a blueprint to make the company future-ready with a big shift towards green energy. The plan included a ₹75,000-crore investment over the next three years in building a new energy business, setting up India’s first carbon fibre plant, and a foray into the 5G mobile network solutions market. The company also intends to be a carbon-neutral firm by 2035, Ambani said.

Brokerages bullish

Global brokerage Morgan Stanley on Wednesday raised its target price for RIL to ₹3,253 with over 20 per cent upside while maintaining an ‘Overweight’ rating on the stock. “We estimate tightness in the gas and fuel refining markets will fund nearly half of RIL’s new energy capex over the next three years, as refining margins and gas prices stay above mid-cycle levels,” Morgan Stanley said in a report. 

“India’s hydrogen adoption plans are scaling up more quickly than we anticipated as corporates and policy-makers have put in place the building blocks for investment in a manner similar to natural gas in 2015 and electricity more recently,” it added. 

The brokerage firm expects up to a 10 per cent boost to RIL’s NAV in anticipation of quicker hydrogen monetisation – “quite similar to its digital and retail NAVs over the past decade, which were discounted 3-4 years ahead of their actual earnings contribution,” it said.

“We estimate hydrogen can achieve a 14-15 per cent ROCE for RIL on a through-cycle basis – on par with its highly profitable oil-to-chemicals operation. As the green hydrogen ecosystem is rolled out, it will also raise demand for RIL’s solar panels,” it further added.

Earlier this month, Goldman Sachs also reiterated a ‘Buy’ (on CL) rating on the stock with over 20 per cent upside.

“For RIL, strong cash-flow generation in the old energy business (low-cost structure and highest complexity) can fund the capex of the new energy business and, in turn, drive one of the fastest and most-profitable net-zero transitions by 2035 amongst large energy companies, on our analysis,” it said in a report. 

“Overall we expect strong earnings growth of 35 per cent CAGR in FY21-24E, with our FY23/24E earnings 26 per cent/26 per cent above consensus. For 4QFY22, we forecast 7 per cent QoQ growth led by refining and telecom division with further acceleration ahead,” it added.

Motilal Oswal Research also reiterated a ‘Buy’ rating on the stock earlier this month with a target price of ₹2,880. 

Another reason for RIL stock to rise is expected global fund flows, said market men. According to brokers, RIL’s weightage in MSCI global index is likely to see an increase in the upcoming rejig on May 12. This will result in an inflow of $200 million, they added.

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