New RIL investments could double earnings, says Morgan Stanley, raises share price target

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Shares of Reliance Industries Ltd (RIL) rose nearly 2% to 2,581 each on BSE in Monday’s trading session after global brokerage Morgan Stanley said in a report that the fourth investment round of about $50 billion in spending over the next three years could help the conglomerate double its profits.

“RIL’s fourth round of investment this century presents significant differences from previous rounds, underappreciated energy tailwinds and the potential to double earnings by 2027,” the note reads. .

Spending is planned in chemicals, 5G, retail and new energy over the next three years. However, retail, telecommunications and new energy are likely to be more concentrated over the next two years with around 25% of total investment in each of the verticals over the next three years, Morgan Stanley added while maintaining the overweighting RIL stocks and increasing the target. price at 3,085 (since 3015).

“The 4th round of investment aims to respond not only to the domestic market, but also to international opportunities in green infrastructure, particularly in new energy and chemicals, as well as in telecommunications with the merger with Qualcomm”, said he declared.

Reliance Industries’ 45th Annual General Meeting (AGM) last week touched on the company’s ambitious plans across all lines of business, particularly the ensuing 5G launch, foray into the FMCG space and new energy investments.

The general meeting presented the succession plan along the expected lines and the new capex phase on the new growth platforms. Reliance Jio fitted out Plan to invest 2 tons on 5G with pan-India rollout by December 2023, while retail has announced its entry into Fast Moving Consumer Goods (FMCG) sector. The renewable transition roadmap provided timelines for investment and commissioning.

“We are factoring in higher capex and higher profits from Jio and O2C. We are increasing our estimated capital expenditure for FY23/24/25E to Rs1.59/1.55/1.59 tn respectively, to accommodate account of higher capital expenditure in Jio, conventional O2C and New Energy businesses. We are also building $9 billion in O2C capex and higher subs in the home broadband segment,” another company said. global brokerage Jefferies in a note last week following the AGM announcements.

Retail, telecommunications and new energy may be the next growth engines over the next two to three years, given significant technological advances and ambitious growth targets, analysts say.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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