RIL's market capitalisation to swell by up to $100 billion, predicts Morgan Stanley

Morgan Stanley has raised its target price for RIL by over 16 percent to Rs 3,540

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Brokerage Morgan Stanley said Reliance Industries Ltd could boost its market capitalisation by as much as $100 billion in its fourth monetisation cycle, driven by new cash flow streams and improved valuation multiples.

Over the past three decades, RIL has delivered 2-3x returns for shareholders, with each decade adding over $60 billion in market value.

Based on these projections, Morgan Stanley, which has an 'overweight' rating on RIL, has raised its target price for the stock by over 16 percent to Rs 3,540, indicating a potential upside of around 13.5 percent from the previous closing price.

Morgan Stanley believes RIL's fourth monetisation cycle will be driven by telecom tariff hikes, revenue from its new energy business, an upcycle in chemicals, and the back-end integration of its retail business.

This marks a significant shift from previous cycles, which heavily relied on oil and petrochemicals, indicating a move towards consumer and technology sectors.

"RIL has been a 'show me' story for the past decade and has seen significant market cap inflection once new revenue streams such as new energy, higher telecom tariffs and chemical margins have been delivered," Morgan Stanley stated.

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Accordingly, the brokerage forecasted a 12 percent compounded annual growth in RIL’s earnings per share between FY24 and FY27, driven by the company's investments in new energy and retail expansion, which will help capture market share from the unorganised sector.

Further, Morgan Stanley has marginally raised its FY25 earnings-per-stock (EPS) estimates for RIL, by 7 percent for FY26 and by 8 percent for FY27, factoring in recent telecom tariff hikes, higher oil prices, and improved refining margins.

Morgan Stanley also noted that RIL’s valuation multiples have varied across past investment cycles, with the company's return on equity (RoE) expected to surpass the cost of capital as it transitions to a more profitable, sustainable, and less cyclical growth model due to changes in both business and capital structure.

At 12.37 pm, shares of RIL were trading marginally higher at Rs 3,135.55 on the NSE.

Also Read | RIL becomes first Indian company to cross Rs 21 lakh crore mcap

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

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