UBS upgrades RIL certificate to buy from Neutral, sees up to 30% rise in one year
Swiss brokerage UBS Securities on Tuesday upgraded shares of Reliance Industries Limited (RIL) to buy from breakeven with a 12-month price target of Rs 2,900 to Rs 3,150.
On Tuesday, the certificate changed hands at around Rs 2,438.
According to UBS, the key to Reliance Industries’ share price performance drivers are new investment opportunities to deploy strong cash flow profitably.
With India’s commitment to net zero carbon emissions by 2070, UBS sees it as a $20 trillion opportunity in renewables, batteries and hydrogen.
“Our analysis of RIL’s New Energy business suggests that it may invest approximately $36 billion in new energy this decade. However, we believe investors have yet to grasp this, given the lack of detail on capacity, investments, earnings drivers, etc.,” UBS said in a report.
“We estimate that this opportunity could create $35 billion in value by FY30, which when scaled back to FY24 adds Rs234/share to our SOTP (sum of the parts) valuation. account of the impact of fuel export taxes (reduction of short-term oil-to-chemicals [O2C] revenue), which appears priced in, while the removal of export taxes offers upside potential,” the report adds.
According to UBS, Reliance Industries is targeting 20 GW of solar photovoltaic (PV) manufacturing capacity that would be integrated with 90 ktpa of polysilicon from Jamnagar (supported by the company’s environmental clearance proposal).
Similarly, the focus is on the 20 GWh Battery Energy Storage System (BESS) fabrication facility. UBS expects solar PV/BESS capacity to grow from 15 GW/5 GWh in FY26 to 27 GW/15 GWh by FY30.
The New Energy division can offer grid-scale power with BESS to its other businesses on fixed yields, consuming more than 50% of captive capacity for the next several years.
UBS also expects retail and telecommunications businesses to grow faster.
UBS also upgraded Reliance Industries Global Certificates of Deposit (GDR) to buy and raised the price target from $77.33 to $78.75.
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