As the world reinvents the way in which energy is produced and used, and as energy security takes center-stage, green hydrogen is gaining attention. According to global brokerage Morgan Stanley, with hydrogen adoption plans progressing rapidly, RIL is best positioned to capitalize. Energy regeneration should help fund its development and raise the multiples.
Increasing awareness of energy security is creating new and larger markets for solar panels and electrolysers, which not only Reliance Industries (RIL) The new energy ROCE but will also help fund this growth, the note said.
“We expect strength in the gas and fuel refining markets to account for nearly half of RIL’s new energy capex over the next three years as refining margins and gas prices remain above mid-cycle levels,” Morgan Stanley said. It has a buy rating on RIL shares and has raised the target price 3,253 (from 2,926).
As the green hydrogen ecosystem is launched, it will also increase the demand for RIL’s solar panels. To put things in perspective, India’s 2030 hydrogen production target will absorb the entire 100GW of cumulative panel capacity that RIL is planning to achieve.
“RIL’s petcoke gasifiers can also be monetized at higher multiples as hydrogen demand exceeds supply, and green/blue hydrogen export potential also supports multiples, especially as RIL reuses its energy/chemical operations. Ultimately, RIL’s hydrogen push will drive lower operating costs in the medium term, while also advancing its net carbon-zero target,” it added.
Morgan Stanley believes RIL’s share price is of almost zero value to the new energy business and no upside from NAV accretion in the conventional energy business, especially as it funds the next investment cycle. “RIL is well funded for new energy investments, and the net debt balance will remain in the range unlike in previous cycles.”
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