Multiple catalysts for re-rating across verticals as RIL exits fourth investment cycle: Morgan Stanley

New Delhi: Global brokerage Morgan Stanley has pointed to multiple catalysts for re-rating across verticals as Reliance Industries Limited (RIL) exits its fourth investment cycle.

RIL's F4Q24 earnings were slight beat to estimates. Its Energy EBITDA stood out while retail was lower. Net debt and capex intensity declined to the lowest in two years, it said.

Global brokerage firm Jefferies said that RIL’s EBITDA rose 5 per cent quarter-on-quarter which was in line. While O2C and Jio were ahead, Retail missed. Retail growth was soft though the balance sheet improved and net debt declined aided by capital raise and asset divestiture.

Jio was ahead on higher ARPUs due to an improved subscriber mix. O2C profitability rose on robust refining, while petchem was subdued, the brokerage said.

UBS said in a report that on digital, the future growth drivers include 5G adoption (over 108 million subscribers have migrated to Jio’s 5G network) and home connects (Jio AirFiber is now being offered across 5,900 towns). On Retail, it expects the near-term sales growth to be driven by higher sales/sq ft from stores added (3.6K) in the last two years, accompanied by an expansion in margins.

RIL’s consolidated net debt declined 3 per cent QoQ to Rs 1,163 billion, while capex moderated 23 per cent QoQ to Rs 232 billion, it said.

“We expect potential net debt reduction over the coming quarters," UBS added.

JP Morgan said in a note that RIL’s growth in FY25 should come from organic growth in Reliance’s consumer businesses. The company is currently spending $10 billion on new petchem capacities and another $10 billion on creating new renewable/solar capacities, which should also help growth over the coming years.

The much-anticipated listing of Retail/Jio could also provide near-term catalysts for the stock.