Faster deleveraging, recovery in energy, retail could spur RIL re-rating

Further re-rating of the Reliance Industries Limited (RIL) stock could be spurred by faster deleveraging and the next leg of growth and surprises should be from volume and margin recovery in energy and retail, according to US broking house, Morgan Stanley.

“Deleveraging has played out faster than expected, fueling rerating. The next leg of growth and surprises should be from volume and margin recovery in energy and retail, driving a 23% EPS CAGR in F20-F23. Clarity on the digital ecosystem should spur further re-rating,” Morgan Stanley said.

Morgan Stanley has argued that debt reduction was key to RIL’s outperformance. Over the past two months, it has announced the sale of $ 14 billion of assets, completed a $7 billion rights issue and slowed the run rate of new investment by a quarter.