RIL shares: According to Morgan Stanley, Its fourth monetization cycle of the century, Reliance Industries’ market cap has the potential to increase by up to $100 billion.
During the previous nearly three decades, monetization cycles have created value for RIL shareholders two to three times over, with a market capitalization of at least $60 billion being created per decade.
Value Creation Journey of Reliance Industries
In what Morgan Stanley called its fourth monetization cycle of the century, Reliance Industries Ltd. (RIL) has the potential to increase its market capitalization (m-cap) by up to $100 billion. It stated that new cash flow streams would appear, RIL’s business cycles would inflect, and value multiples would catch up, making this feasible.
The RIL’s tagline, “Growth is Life,” is still in effect, and the foreign brokerage noted that Reliance’s Monetization 4.0 differs from earlier rounds of monetization in that it is bolstered by the business upcycle domestic demand, and reduced competition. Cash flows from this monetization are also being invested into new chemicals and new energy.
According to Morgan Stanley, during the last nearly three decades, monetization cycles have created wealth for RIL shareholders two to three times over. In these cycles, Reliance Industries’ market cap created an average of $60 billion or more.
Reliance Industries market cap could soar by $100 billion
Gains in market share for RIL, full integration, and—above all—the capacity to perform better than anticipated by investors every time the Mukesh Ambani-led company reimagines its business have been crucial to this.
This monetization comes after RIL invested $60 billion in 2021-23, which was the company’s shortest investment cycle since the 1990s. According to Morgan Stanley, there is a lengthy runway to continuously provide earnings growth if investments in new energy, retail development to grab market share from the unorganized sector, and repurposing of current energy firms maintain above 10% for the next three years.
With several triggers across verticals, Reliance Industries has projected a compound annual growth rate of 12 percent in earnings per share (EPS) over FY24–27.
In light of the recent increases in telecom tariffs, oil prices, and refining margins, we have raised our forecasts of EPS fractionally for 2025, 7% for 2026, and 8% for 2027. We have raised our Reliance Industries share price target from Rs 3,046 to Rs 3,540.
Morgan Stanley maintains ‘Overweight’ on Reliance Industries
For the past ten years, RIL has been a “show me” tale. However, Morgan Stanley noted that once new income sources including fresh energy, higher phone tariffs, and chemical margins were provided, RIL saw a dramatic shift in market cap.
“Throughout the last three investing cycles, the behavior of RIL valuation multiples has changed. RIL is moving toward a more lucrative, sustainable, and less cyclical growth model as a result of improvements to its capital structure and business operations,” according to Morgan Stanley. As a result, Reliance Industries’ return on equity (ROE) is expected to exceed the cost of capital going forward.
As RIL catches up with local and international peers that have experienced the business upcycle and monetization re-rate multiples by 30% in the last year, we boost our multiples (in SOTP) by 0.5-1 to reflect this monetization,” the statement read.
Read more: Mutual Fund vs Sip Calculator: Sip or Mutual Funds Which is Better?