Reliance set to gain most as China curbs price wars, says Morgan Stanley

By Abhishek Vishnoi

   

India’s Reliance Industries Ltd. stands to benefit the most from China’s push to curb overcapacity from a gamut of industries, and the conglomerate’s own efforts to streamline its businesses, according to Morgan Stanley. 

 

Billionaire Mukesh Ambani’s company “is the largest beneficiary of China’s anti-involution focus across energy and solar supply chains,” analysts including Mayank Maheshwari wrote in a note dated Sept 1. “Reliance is going through self-anti-involution in consumer businesses and benefiting from China’s anti-involution drive in multiple ways – both of which are not priced in.”  

 

 

The term ‘involution’ in China refers to cutthroat competition with little payoff. ‘Anti-involution’ describes moves by companies and policymakers to counter that trend, a shift that has supported equities as Beijing battles deflation. 

 

Reliance is building out a fully integrated solar supply chain in India at a time when overcapacity is forcing China to rationalise its polysilicon production. That could cut Reliance’s energy costs by as much as 40 per cent by 2030 and lift new-energy earnings contributions to 13 per cent by 2027, according to Morgan Stanley.

 

“China’s anti-involution marks the bottom of the petrochemical cycle” and its efforts to tackle overcapacity in solar industry will aid pricing for Reliance’s solar supply chain, the analysts said. They estimate anti-involution efforts both in China and at the company adding $20 billion in net asset value and 17 per cent to earnings estimate for fiscal year 2028.

 

Morgan Stanley maintained an overweight rating on the stock and raised its 12-month price target to ₹1,701 from ₹1,602, implying a 26 per cent gain from Monday’s close. The stock’s current “valuations imply near zero value to new energy and AI investments with limited upside on FMCG growth,” the analysts said. 

 

The stock rose as much as 2 per cent in early trading to extend its year-to-date gain to more than 13 per cent. It is trading at 21 times on earnings-based valuation, in line with the metric’s five-year average, according to data compiled by Bloomberg.

 

In a seperate note, Maheshwari said there is an 80 per cent probability for the stock to rise in absolute terms over the next 60 days amid optimism over anti-involution efforts in China and at the company and AI investments.