Reliance Industries shares jump 2%. Is it about AGM or what China is doing?

Shares of India's most valued company, Reliance Industries (RIL), on Tuesday jumped over 2% to reverse losses made in the last 2 days when investors were a tad disappointed with the AGM announcement of Jio IPO, as it left the parent entity with a holding company discount.

Today's rally is now being attributed to not just the positive long-term outlook of brokerages following the AGM, where billionaire Mukesh Ambani laid out ambitious plans and called AI and FMCG as new growth engines for the conglomerate, but also to a Morgan Stanley report, which said RIL benefits the most from China’s push to curb overcapacity from a gamut of industries.

The global brokerage said Reliance is the largest beneficiary of China’s anti-involution focus across energy and solar supply chains.

“Reliance is going through self-anti-involution in consumer businesses and benefiting from China’s anti-involution drive in multiple ways – both of which are not priced in," the brokerage said, while giving a target price of Rs 1,602 on the stock with an overweight rating.

Also Read | Reliance Intelligence is the new Jio for Mukesh Ambani: Can AI leap help RIL become deep-tech giant?

The term ‘involution’ in China refers to cutthroat competition with little payoff. ‘Anti-involution’ describes moves by companies and policymakers to counter that trend, a shift that has supported equities as Beijing battles deflation.

Reliance is building out a fully integrated solar supply chain in India at a time when overcapacity is forcing China to rationalise its polysilicon production. That could cut Reliance’s energy costs by as much as 40% by 2030 and lift new-energy earnings contributions to 13% by 2027, according to Morgan Stanley.

“China’s anti-involution marks the bottom of the petrochemical cycle” and its efforts to tackle overcapacity in the solar industry will aid pricing for Reliance’s solar supply chain, the analysts said. They estimate anti-involution efforts both in China and at the company, adding $20 billion in net asset value and 17% to earnings estimate for fiscal year 2028.

Besides Morgan Stanley, multiple brokerages have given bullish calls on RIL shares following the AGM. Jefferies has given a Buy rating with a target of Rs 1,670, indicating strong growth in Jio, Retail, and Energy. The brokerage believes RJio remains well-placed to deliver 18%/23% CAGR in Revenues/EBITDA over FY25-27, given rising tariffs in mobile and scale-up of home broadband business.

Domestic brokerage Nuvama, which has the highest target price of Rs 1,733 on RIL, said a multi-decadal opportunity is visible in the new energy business, while O2C expansion is on track and that AI and FMCG will be the additional growth drivers for the behemoth.

Also Read | What record-breaking Jio IPO means for 44 lakh Reliance Industries shareholders

CLSA has given a target price of Rs 1,650, saying it continues to find the stock at an attractive risk-reward entry point.

Both BNP Paribas and Goldman have a target price of Rs 1,700, BofA Securities Rs 1,660, Citi Rs 1,690, JP Morgan Rs 1,695 and Morgan Stanley Rs 1,602.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)