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Global research firm Morgan Stanley on Monday said that Reliance Industries Ltd is on a path towards a $20 billion-plus EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – a measure of a firm's overall financial performance – run rate inflection, which could be supported by five major factors.

Besides the company's new energy business could add $50 billion in market cap in 2022, the brokerage said.

"A refining golden age, tightening global gas markets, and improving telecom subscriber quality point to a $20 billion EBITDA run-rate by end-2022," the investment banking firm has said in a note.

Post becoming the first firm to hit $100 billion revenue in the financial year ended 31 March, it added, "Reliance is on a path toward a $20 billion EBITDA run rate inflection, with five-pronged support" of high refining margin, telecom revenue per user rising, global gas market tightening, rising traction on digital commerce and superior petrochemical spreads."

On 6 May, RIL reported a consolidated EBITDA of 1,25,687 crore ($16 billion) for April 2021 to March 2022 fiscal (FY22), up 29% year-on-year.

A 26% surge in net profit at 67,845 crore ($8.8 billion) was led by its three super-star businesses – oil to chemical (O2C), telecom and retail.

"Refinery margins could nearly double and be sustained at high levels for the next half-decade, with global fuel markets seeing sustained lower supply due to a lack of investments," the brokerage stated. "We see telecom ARPUs (Average Revenue Per User) rising, quality of subscribers improving and churn falling."

"RIL is producing 18 million standard cubic meters per day of gas from its KG basin, which we expect to rise to 30 mmscmd peak production over the next two years, with increases starting in January 2023."

"Rising production, along with a tailwind from elevated global gas prices, could increase RIL's upstream profitability multi-fold over the coming years," it said.

Gas price for RIL's KG gas fields rose to $9.9 per million British thermal unit in April from $6.13, and the firm expects further increases in the six-monthly reset in October. "This should help nearly double EBITDA by end-2022," Morgan Stanley said.

Also, rising traction on digital commerce with 193 million subscribers and a consistent 20% revenue contribution should expand margins.

"Digital EBITDA (ex-telecom) for FY22 stood at $200 million, but earnings contribution was limited. We think the scale-up of digital revenues is key for RIL to command higher than telecom multiples," it said.

"The new energy business, along with the five-pronged tailwind, could add $50 billion in market cap in 2022, in our view," the brokerage said.

RIL's FY22 investments of $13 billion increased 25% year-on-year and Morgan Stanley believes this should be sustained at such levels for the next few years.

Nearly 30% of the capex was in telecom, 20% in oil to chemicals, 30% in retail, and 11% in new energy.

Including spectrum acquisition, total investments were at $19 billion.

Net interest cost was nearly zero for the first time in nearly three years as net debt declined. Including spectrum liabilities, total debt at the end of FY22 was $10 billion, with Jio's standalone net debt at $5.4 billion.

"With progress in new energy investments, a $50 billion market cap uplift appears ahead as EBITDA trends pose upside risks."

On Monday, RIL was the top drag on the Sensex pack, dropping 3.97%, after the company's March quarter earnings failed to cheer investors.

On the NSE, the stock declined 4.29% to end at 2,508 apiece.

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