Reliance Poised For Gains As Morgan Stanley Hikes Target Price, Eyes Over 25% Upside: Here's Why

Reliance Industries Ltd. will be a major beneficiary of China's recent drive to curb overcapacity across energy and solar supply chains, also called 'anti-involution'. This triggers a re-rating cycle for RIL for the first time since the Covid-19 pandemic, Morgan Stanley said.

Anti-involution refers to China's current campaign to combat intense, self-destructive competition and diminishing returns in its economy by regulating price wars and overproduction.

Analysts at the multinational brokerage firm said the conglomerate's self-anti-involution in consumer retail and telecom is also bearing fruit. "Overall, involution adds $20 billion in NAV and 17% to the fiscal 2028 EPS estimate," a note said.

A third of polysilicon capacity is being rationalised in China while RIL ramps up its fully-integrated supply chain as the only player in South Asia, analysts said. RIL's own energy costs may fall up to 40% by 2030 as it shifts to renewable sources for internal power needs in two years. As RIL starts to export and sell domestically, analysts estimate new energy to contribute 13% to earnings.

In the chemicals segment, Reliance Industries is also upgrading its margins by increasing cheap US ethane feedstock imports by 50% and expanding PVC capacity in the undersupplied Indian market. Besides, China's anti-involution marks the bottom of the petrochemical cycle, the note said.