RIL shareholders take note! This brokerage expects 11% earnings CAGR by FY28, here's why

Reliance Industries Ltd (RIL) is poised for significant earnings growth over the next few years, with Morgan Stanley projecting an 11 per cent compound annual growth rate (CAGR) in earnings between FY25 and FY28. The global brokerage attributes this expected performance to key factors such as strengthened oil-to-chemicals (O2C) margins, supported by lower feedstock prices and a tightening refining cycle, robust momentum in consumer brands aiding retail expansion, and anticipated tariff hikes in the telecom sector.

"We expect RIL to see 11 per cent earnings CAGR over F25-28e," said Morgan Stanley. RIL’s recent strategic partnerships, notably with Google for AI and cloud services, mark a pivotal shift in its approach to digital adoption and long-term monetisation strategies.

In its latest research, Morgan Stanley highlights the transformative potential of Reliance’s collaboration with Google Cloud, where RIL will leverage its power and data centre infrastructure to offer compute-as-a-service on Google’s TPUs. The partnership is expected to accelerate digital adoption, reinforce RIL's presence in India’s burgeoning AI and cloud markets, and expand its data centre capacity beyond the earlier 1GW target.

Reliance Jio and Google are set to provide customers with access to Gemini Pro AI model, 2TB of cloud storage, and added functionalities as part of Jio's 5G offerings, starting at Rs 51 per month.

The brokerage’s base case values RIL’s petrochemicals and refining segments at 8x and 7.5x FY27 EV/EBITDA, retail at 32x, domestic exploration and production at 5x, and telecom at 13x FY27 EV/EBITDA. RIL’s new energy ventures are valued at an enterprise worth $25 billion.

Morgan Stanley’s scenario analysis suggests a potential upside in share price, with RIL possibly reaching Rs 2,184 under a bull case, reflecting higher O2C margins and rapid e-commerce and clean energy expansion. In the base case, the target is Rs 1,701, indicating further room for growth. Base assumptions include a core gross refining margin of $11.2 per barrel in FY27, petrochemical EBITDA margins of $206 per tonne, and annual investments of approximately $14 billion. Telecom average revenue per user is projected to reach Rs 236 per month by FY27 as lower-priced plans are rationalised. The company’s ongoing investments and strategic alliances are viewed as critical for sustaining long-term earnings growth and capitalising on emerging digital and energy market opportunities.