With much higher cash flows and strategic partners, Morgan Stanley sees the next investment cycle as less challenging, both to earnings and the company's balance sheet.
Reliance Industries (RIL) share price climbed more than 2 percent in intraday trade on BSE on September 1, featuring among the top boosts to the benchmark Sensex.
In a recent report, brokerage house Morgan Stanley said RIL may make an investment of up to $60 billion in the next decade.
"We estimate this vision will need $50-60 billion in growth capex if executed on a standalone basis—ie, similar to the size of investments made in the last decade," CNBC-TV18 quoted the report as saying.
However, with much higher cash flows and strategic partners, Morgan Stanley sees the next investment cycle as less challenging, both to earnings and the company's balance sheet.
"RIL has shown the ability to monetize the growth prospects of its digital assets and de-lever its balance sheet, but simultaneously has highlighted plans to expand its reach in new energy and chemicals, and has rolled out its e-commerce platform," the brokerage said.
"As RIL embarks on these growth initiatives, capital allocation will take centre stage and likely drive stock performance. As the market starts appreciating its plans for new energy, its path to net carbon zero, integration into chemicals, and execution on last-mile consumer reach in retail, we believe a steady re-rating similar to that of global peers should be in the works."
RIL's ability to tap into global partnerships to address untapped TAM should reduce investor skepticism about execution while keeping net debt in check, it added.
The brokerage remains overweight on the stock and raised its 12-month target price to Rs 2,247 from Rs 1,810. It has also raised EPS estimates by 8 percent and 12 percent for FY22 and FY23.
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