Betting on the potential opportunities in clean energy in India, Bernstein sees the new energy business of Reliance Industries becoming a new pillar of growth, and expects revenue from this vertical to hit USD10 billion by 2030.
Clean energy could have a total addressable market (TAM) of USD 30 billion in 2030, compared to the current size of USD 10 billion, and by 2050, Bernstein estimates it to reach USD 200 billion and a cumulative spending of USD 2 trillion.
By 2030, Bernstein sees potential for RIL to capture 60%, 30% and 20% of the total addressable market in solar, battery and hydrogen segments, respectively.
RIL plans to have 100 GW of installed solar capacity by 2030, which is 35% of India’s targeted capacity of 280 GW, but represents a 50% incremental share, it said.
How much could the new energy business be worth to RIL?
This to a considerable extent depends upon the conglomerate’s ability to execute and grow the new energy business.
Based on a 2050 TAM of USD206 billion and assuming a 1.0-1.5x multiple, Reliance New Energy valued in the range of INR 100-200/share, after discounting the valuation back to today, Bernstein analysts Neil Beveridge and Rahul Malhotra said in their report.
By 2050, Reliance New Energy would be valued at INR 1,200-2,200 per share or more than 10x of the current valuation, they said.
Business Opportunities
The government’s energy policies and the growing adoption of electric vehicles in India gives Bernstein confidence in growth in RIL’s new energy business.
The government has set a target of 500 GW of installed renewable energy by 2030. Of this, solar is expected to account for the largest share at 280 GW. As of February, India had 65 GW of solar power.
Batteries is another segment that offers great potential with the rising adoption of electric vehicles. The government has an EV sales penetration target of 30% for private cars, 70% for commercial vehicles and 80% for two- and three-wheelers by 2030.
“With India EV penetration at only 1% today, we think this will take longer given lack of charging infrastructure, lack of affordable EV options and no established battery supply chain,” the research firm said.
Further, India’s target of producing 5 million tonne of green hydrogen annually by 2030 is another area of opportunity for RIL.
Overall, RIL is building a fully integrated end-to-end renewables energy ecosystem through solar, batteries and hydrogen.
“No other energy company is investing across the entire new energy value chain but if Reliance can pull this off, then the value creation and earnings potential will be substantial,” the research firm said.
The firm has an “outperform” rating on shares of RIL with a target price of INR 3,040, implying an upside potential of nearly 21% from the current levels. On Tuesday, the stock ended 1.5% up
at INR 2,520.85.
