Morgan Stanley has an 'overweight' rating on Reliance Industries Ltd (RIL), but has sharply raised the target price on the stock to Rs 2,925.
The firm expects silicon and hydrogen to emerge as the next decade’s ‘new oil’ for Reliance. It is a USD 60 billion potential opportunity in terms of value creation if everything falls into place by 2025.
In base case, Morgan Stanley expects a contribution of USD 25 billion to the one-year forward NAV, and a steady 11-13 percent return on capital employed (RoCE).
The brokerage house believes the new energy EBITDA could be as large as what the current petrochemical business contributes to Reliance and the multiples could be twice as much as the current petrochemical business' valuation.
Despite a 27 percent YTD outperformance of Reliance, still, it is trading at a discount to markets and peer multiples, and hence the risk-reward is favourable.
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