RIL share price hits all-time high; Morgan Stanley sees 20% more upside

Shares of the oil-to-telecom conglomerate jumped 2.6% to attain a new high of ₹2,788.8 apiece on the BSE after analyst at Morgan Stanley said that “Reliance is firing on all cylinders”, citing improvement in gross refinery margins and continued strong performance by retail and telecom businesses. The global brokerage firm expects up to a 10% boost to RIL's net asset value (NAV) in anticipation of quicker hydrogen monetisation as the company invests around $4-5 billion in new energy businesses.

Morgan Stanley raises price target

Global brokerage Morgan Stanley has raised its target price on the Reliance stock from ₹2,926 apiece to ₹3,253 per share, an upside of almost 20%, with an overweight rating. "We estimate tightness in the gas and fuel refining markets will fund nearly half of RIL's new energy capex over the next three years as refining margins and gas prices stay above mid-cycle levels," it said in its report.

It further stated, “We expect up to a 10% boost to RIL's NAV in anticipation of quicker hydrogen monetisation – quite similar to its digital and retail NAVs over the past decade, which were discounted 3-4 years ahead of their actual earnings contribution.”

"We also estimate hydrogen can achieve a 14-15% ROCE for RIL on a through-cycle basis – on par with its highly profitable oil-to-chemicals operation. As the green hydrogen ecosystem is rolled out, it will also raise demand for RIL's solar panel," it added.

On February 17, 2022, India had launched the Green Hydrogen Policy aimed at boosting the domestic production of green hydrogen to 5 million tonnes per annum (MTPA) by 2030, half of the EU's target of 10 MTPA, and making India an export hub for the fuel. Big industrial houses like Reliance Industries, Adani Group, L&T-Renew Power and several PSUs like NTPC, IOC, and HPCL are planning big investments in the sector.

According to a KPMG report, the green hydrogen (hydrogen made with renewable energy) demand could comprise 20-30% of the overall hydrogen demand in India, which is expected to jump to almost double at 12 MTPA.

How RIL shares fared so far?

On Thursday, RIL share price opened higher for the third straight session at ₹2,759 against the previous close price of ₹2,718.40 on the BSE. During the session, the stock price gained as much as 2.6% to hit a fresh high of ₹2,788.8 apiece, before closing at ₹2,782.15, up 2.35%. The share breached its previous high of ₹2,750 that it touched on October 19, 2021.

On the volume front, there was a surge in buying as 2.81 lakh shares worth 77.79 crore changed hands over the counter as compared to two-week average volume of 2.89 lakh. The market capitalisation of the country’s most valued firm soared to ₹18.85 lakh crore in intraday trade.

Shares of Reliance Industries have risen nearly 10% in the last three sessions after its retail arm has acquired a 51% majority stake in couturiers Abu Jani Sandeep Khosla (AJSK) for an undisclosed amount. Reliance Brands, a subsidiary of Reliance Retail Ventures, will invest in AJSK to build a stronger platform to expand the reach of Indian craft in India and across the globe.

As per the share price history of Reliance, the stock has delivered 46% returns to its shareholders in the past one year in comparison to 20% growth in the BSE benchmark Sensex. The stock has risen 6% in the last six months and 16% since the beginning of the calendar year 2022 (year-to-date basis).