CLSA values Reliance’s solar biz at $30 bn; sees 70% upside potential in stock

Believing in Reliance Industries’ (RIL) growth potential in new energy business, foreign brokerage firm CLSA has maintained its ‘outperform’ rating on the country’s most valued stock with a target price of ₹1,650 per share. The target price indicates an upside potential of 32% over RIL’s last closing price, while the brokerage sees up to 70% upside in the blue-sky scenario.

“In our blue-sky case, we expect potential upside of 72% (₹2,186) driven by possible value unlocking for both Jio and Retail, along with scale-up of new energy to the size of the oil-to-chemical (O2C) business,” the brokerage house says in a report.

CLSA pegs the telecom-to-oil conglomerate’s solar solar photovoltaic (PV) value at $30 billion, saying that the “market is ignoring a new energy business”. The RIL stock is offering an attractive entry point to play important catalysts in 2025, it says.

The agency believes that the current valuation is not factoring in the value of new energy projects whereas recent listings - Premier Energies and Waaree Energies - in the solar space indicated a lot of investor excitement in the sector. “Recovering global solar PV pricing may aid in this rerating. A gradual ramp-up of new energy projects starting with the firm’s PV gigafactory will be a catalyst,” the report highlights.

“Reliance’s fully integrated 20 GW solar gigafactory, set for launch in 3-4 months, will benefit from the firm’s tech lead via global partnerships. We derive a solar business value of $30bn, based on a discount to recently listed peers, yet Reliance stock is trading within 5% of our rainy-day valuation (assigning zero value to the new energy business),” it notes.

Other than the $30 billion value assigned to the solar PV business, the brokerage has assigned a 2.5x EV/Committed Capital multiple for the other parts of the new energy business. “Given the remaining capital of $5bn, this implies a March-2026 value of $13bn. Adding these two parts takes our overall value for Reliance’s new energy business to $43bn as at the end of March-2026.”

As part of its broader new energy business initiative, Reliance plans to establish a fully integrated 20 GW solar gigafactory by 2026-27, starting with cell to module capacity this year. The company has set an ambitious target to scale up the new energy business to the size of its O2C business ($7.5bn EBITDA in FY24) in the next 5-7 years.

RIL aims to use its technology lead through a host of acquisitions and JVs with companies like REC Solar, Caelux and others to produce the more advanced Heterojunction technology (HJT) modules with hopes of further raising its efficiency and effective life by using innovations like perovskite among others.

The foreign brokerage has projected an annual solar business EBITDA of $1.7 billion over the next four to five years and a value of over $30 billion, which is at a discount to replacement cost valuation of recently listed Indian solar PV manufacturers.

Recently, two new solar PV manufacturers - Premier Energies and Waaree Energies – made their debut on the stock market, driven by huge interest in renewable energy. The brokerage opines that high investor interest and requirement of capital for scaling up capacities is likely to be a catalyst for other solar players to enter the public markets as they have plans to notably expand manufacturing capacity within the next three years.

The agency believes that solar PV manufacturing is in its early stages in India but the number of players has grown significantly. However, only a few of them have reached the scale and profitability to consider raising funds from the public markets.

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