Globally renowned research house Goldman Sachs, on Tuesday, said that Reliance Industries Ltd. (RIL) enhance its growth trajectory and impel share prices by venturing into the green energy business. In a note, Goldman Sachs said that the stock prices of Reliance Industries could increase up to 83% from the current level within a year. However, in the base case, the stock has the potential to increase up to 35%, with the target price of Rs. 3,185, within a year.
The research house has identified 3 catalysts behind RIL's potential growth. Nikhil Bhandari, who is the co-author of the report by Goldman Sachs said, "We see three key catalysts: sustainable earnings recovery momentum in each division, new digital product launches, and more details from management on RIL's new energy business road map. These catalysts should drive strong earnings growth of 41% CAGR over FY21-23, and a favorable risk-reward."
Reliance Industries have already ventured into the green energy business, which is anticipated to be a great success. At present global leaders, along with the Indian government is also very concerned about climate change and the promotion of green energy for a sustainable future. Appreciating RIL's step up, the report added, "We see RIL as a greenabler and introduce bottom-up supply-demand analysis of India's green value chain and ascribe a $30/48 bn valuation (12%/18% of SOTP value) in our base/bull case valuation."
Significantly, in 2021, RIL's Chairperson, Mukesh Ambani announced that their company has an ambitious initial investment of Rs. 75,000 crore for the upcoming 3 years to build a new clean energy business. The company has already committed to being net carbon neutral by 2035. Goldman Sachs thinks, "We see significant expansion in the total addressable market for solar, battery, and hydrogen manufacturing globally as well as in India and expect RIL to generate Ebitda of $3.6/12.2 billion in our base case by FY30/FY40."
In the report, Bhandari added, "Our new bottom-up India power model implies quadrupling of renewable capacity to 400GW with an incremental scale larger than the US and at par with Europe. We see a combination of Make in India initiatives such as tariff and non-tariff barriers along with capital subsidies and regulatory changes enabling such investment."
RIL's current stock price is Rs. 2382.00 per share.