Reliance Industries shares surge 2% on China's anti-involution drive and brokerage optimism

Reliance Industries shares jumped 2% on Tuesday, reversing losses made in the previous two days. The rally is attributed to a Morgan Stanley report, which stated that RIL benefits from China's push to curb overcapacity in various industries, including energy and solar supply chains. The brokerage gave a target price of Rs 1,602 with an overweight rating. Multiple brokerages have given bullish calls on RIL shares following the AGM, with Jefferies and Nuvama setting target prices of Rs 1,670 and Rs 1,733, respectively.

Reliance Industries Limited (RIL) shares experienced a significant rally on Tuesday, reversing losses from the previous two days. The upward movement is attributed to a report from Morgan Stanley, which highlighted RIL's benefits from China's push to curb overcapacity across various industries, including energy and solar supply chains. The brokerage firm maintained an overweight rating on the stock and raised its 12-month price target to ₹1,701 from ₹1,602, implying a 26% gain from Monday’s close [1].

China's anti-involution efforts, aimed at countering intense competition and diminishing returns, are expected to support RIL's solar supply chain. The company is building out a fully integrated solar supply chain in India, which could cut energy costs by as much as 40% by 2030 and lift new-energy earnings contributions to 13% by 2027 [1]. Morgan Stanley analysts estimate that anti-involution efforts in both China and at RIL could add $20 billion in net asset value and 17% to earnings estimate for fiscal year 2028.

The positive outlook from Morgan Stanley is echoed by other brokerages. Jefferies and Nuvama have also given bullish calls on RIL shares, setting target prices of ₹1,670 and ₹1,733, respectively [4]. The stock's current valuation implies near zero value to new energy and AI investments with limited upside on FMCG growth [1].

RIL's stock rose as much as 2% in early trading, extending its year-to-date gain to more than 13%. It is trading at 21 times on earnings-based valuation, in line with the metric's five-year average [1]. Analysts at Morgan Stanley have an 80% probability for the stock to rise in absolute terms over the next 60 days [1].

References:
[1] https://www.business-standard.com/companies/news/reliance-set-to-get-20-bn-boost-as-china-curbs-price-wars-morgan-stanley-125090200288_1.html
[2] https://financialpost.com/pmn/business-pmn/reliance-to-gain-as-china-curbs-price-wars-morgan-stanley-says
[3] https://www.ndtvprofit.com/markets/reliance-industries-to-benefit-from-chinas-capacity-curbs-morgan-stanley-hikes-target-price-eyes-25-upside
[4] https://www.ainvest.com/news/reliance-industries-brokerages-set-target-prices-rs-1-733-agm-updates-2509/