Shares of Reliance Industries Limited (RIL) climbed nearly 2% Global brokerage Morgan Stanley said in a report that a fourth investment cycle of an estimated $50 billion spending over the next three years could help the group double its earnings.
“RIL’s fourth investment cycle of this century has significant differences to previous cycles, lower energy tailwinds and the potential to double profits by 2027,” the note said.
The plan is to spend the next three years on chemicals, 5G, retail and new energy. However, retail, telecommunications and new energy are likely to be more front-loaded over the next two years, with about 25% of total investments in each vertical over the next three years, Morgan Stanley added while maintaining the overweight rating. Shares of RIL and increasing the target price 3,085 (from 3,015).
“The fourth investment cycle aims to meet not only the domestic market, but also international opportunities in green infrastructure, particularly in new energy and chemicals and telecommunications with the tie-up with Qualcomm.”
At Reliance Industries’ 45th Annual General Meeting (AGM) last week, the company’s ambitious plans, especially the upcoming 5G launch, foray into the FMCG space and new energy investments were discussed.
The AGM laid out a succession blueprint with expected lines on new development platforms and a new phase of capital expenditure. Reliance Jio laid 2 tn investment plan on 5G with pan-India roll-out by December 2023, while retail announced foray into Fast Moving Consumer Goods (FMCG) business. The renewable transition roadmap provided capital expenditure and commissioning timelines.
“We incorporate higher capex and earnings from Jio and O2C. To factor in higher capex in Jio, traditional O2C and new energy businesses, we increase our capex for FY23/24/25E to 1.59/1.55/1.59 tn respectively. We also generate $9 billion of O2C capex and higher subscriptions in the home broadband segment,” Jefferies, another global brokerage, said in a note after the AGM announcements last week.
According to analysts, retail, telecom and new energy could be the next growth engines in the next two to three years, given the huge technological advancements and ambitious growth targets.
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