High on energy, RIL hits all-time high; M-cap nears Rs 19 trillion

Morgan Stanley says hydrogen will form 10% of earnings

Shares of Mukesh Ambani-led Reliance Industries (RIL) on Thursday hit an all-time high of Rs 2,788.8 apiece on the BSE after brokerage Morgan Stanley raised its target price on the stock by 20 per cent to Rs 3,253 apiece on the back of new energy initiatives.

RIL’s Market capitalisation (m-cap) neared Rs 19 trillion following the intra-day high, surpassing its previous high of Rs 2,732 a share hit on October 19.

RIL’s stock has surged nearly 10 per cent in the last four trading sessions as investors have given a thumbs up to the company’s new energy bet.

Morgan Stanley said in its report, dated April 20, that by 2030, hydrogen and other green energy initiatives would account for nearly 10 per cent of RIL’s earnings.

“We expect up to a 10 per cent boost to RIL's NAV (net asset value) in anticipation of quicker hydrogen monetisation,” it said. “We also estimate hydrogen can achieve a 14-15 per cent ROCE (return on capital employed) for RIL. As the green hydrogen ecosystem is rolled out, it will also raise demand for RIL's solar panels,” it said.

To put things in perspective, RIL intends to become the most integrated green hydrogen player globally, said sector experts. The company has in the last few months acquired players such as REC Solar for growing its in-house solar panel manufacturing. It has also acquired capabilities in energy storage, with stakes in companies such as Ambri (for liquid metal batteries), Lithium Werks (lithium iron phosphate batteries) and Faradion (sodium ion technology). Morgan Stanley said RIL’s solar panel capacity once developed could be leveraged internally to not only power its existing refining and chemicals complex, but also help produce hydrogen, considering its proximity to the sea and existing water management infrastructure at Jamnagar, Gujarat. RIL would then integrate this with its own electrolyzer manufacturing in partnership with Denmark’s Stiesdal and would use the green hydrogen output internally as well for manufacturing green chemicals and fertilisers.

RIL also plans to export green hydrogen to key markets where it supplies gasoline and diesel, such as Singapore, which will have the highest carbon tax in Asia by 2030. It could supply green hydrogen to its telecom towers and existing KG gas consumers, as well as to the industrial belt of Gujarat via the East-West Pipeline, with which it has take-or-pay contracts.

“RIL’s plan for setting up 5,500 retail fueling outlets is key to helping it accelerate adoption of green hydrogen, especially considering the presence along highways of H2-blended CNG for trucks and long-distance buses,” Morgan Stanley said.