RIL stock may gain 80%: ‘Buy’ Reliance shares, new energy a multi-decade growth engine, says Goldman Sachs

In a bull case scenario, Goldman Sachs sees RIL stock rallying close to 80% from current levels.
(Image: REUTERS)

Mukesh Ambani’s new energy push might set Reliance Industries Ltd on a growth path for several decades, prompting RIL share price to rise as much as 80%, said global brokerage, Goldman Sachs. The firm has reiterated its ‘Buy’ call on RIL, raising its bull case target price to Rs 4,400 per share. Goldman Sachs analysts said they see significant expansion in the total addressable market for solar, battery and hydrogen manufacturing globally as well as in India and expect RIL to capitalise on the same with its new-energy venture. RIL was the top gainer on Sensex on Thursday, trading at Rs 2,454 per share, up 1.5%.

Target price revision

RIL’s target price has been upgraded to Rs 3,185 per share by Goldman Sachs which implies an upside of nearly 30% from today’s levels. “We raise our 12-month SOTP-based target price by 12% to Rs 3,185 as we incorporate New Energy capex, earnings and valuation in our numbers and reiterate our Buy rating (on CL),” they added.

The bull case target price set by Goldman Sachs would see RIL shares rally 80% to touch a target of Rs 4,400. Under this scenario, the valuation pinned on the new energy business is $48 billion. On the other hand, in a bear case scenario, the stock price is expected to tumble down to Rs 2,080 per share. This implies a nearly 15% downside from current levels. 

New energy, a new growth engine

Reliance Industries earlier this year announced a massive Rs 75,000 crore investment in new energy. The oil-to-telecom behemoth plans to set up four Giga factories to develop a fully integrated, end-to-end renewable energy ecosystem. Analysts at Goldman Sachs said that returns for RIL’s New Energy investments can be materially higher than old energy while terming it as “another multi-decade growth engine” in the recent note. 

RIL plans to manufacture polysilicon, wafers, cells, modules, EV and grid storage batteries, electrolyzer, and fuel cells. “This is in anticipation of acceleration in growth for downstream solar installations, EV and storage battery application, and green hydrogen over the near, medium and longer term respectively. We see significant acceleration in TAM for all three segments globally as well as in India,” Goldman Sachs said. Initiatives such as Make in India, along with tariff and non-tariff barriers are expected to aid the venture.

Three-catalysts for stock price for 80% stock up-move

In a bull case scenario, Goldman Sachs sees RIL stock rallying close to 80% from current levels. For such an up-move the brokerage has narrowed down three catalysts. The primary catalyst among these is a sustainable earnings recovery momentum driven by Retail, Telecom, and Energy is the first catalyst for RIL. Secondly, new digital product launches, such as an Android phone, and the Electronics category in E-commerce is seen as a catalyst for RIL. While a roadmap from RIL’s management on New Energy business is seen as the third catalyst.

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