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On Thursday, Morgan Stanley (NYSE:MS) analysts adjusted their price target for ReNew Power (NASDAQ: RNW) shares, reducing it to $7.12 from the previous $7.31. Currently trading at $6.34, with a market capitalization of $2.31 billion, RNW maintains an Equalweight rating from Morgan Stanley. The revised price target is based on a sum-of-the-parts (SOTP) valuation method. According to InvestingPro analysis, RNW appears slightly overvalued at current levels.
The analysts at Morgan Stanley explained that the valuation multiples for the core renewable energy and transmission business remain unchanged at 10x, 9x, and 7x the forecasted FY29 EBITDA. These multiples are then discounted back to a December 2026 date. The company’s current operations show impressive financial metrics, with InvestingPro data revealing an exceptional gross profit margin of 94.69% and last twelve months EBITDA of $763 million. Additionally, the price-to-earnings ratios (PERs) applied to the solar manufacturing business in the bull, base, and bear case scenarios are set at 25x, 20x, and 15x, respectively.
The revision takes into account a roll-forward of valuations by three months to December 2026 and an adjustment of the cost of equity to 12.2% from 12.4%. This change reflects updates to the market-to-market (MTM) of the risk-free rate, now at 6.8%, and the impact of the USD/INR foreign exchange rate, which was Rs86.92 on February 19, 2025, compared to Rs83.6 in September 2024.
Morgan Stanley’s price target is now exclusively linked to their base case scenario, indicating a shift from their previous approach where probabilities were assigned to bull and bear cases. This adjustment aligns with the recent changes made to their utilities coverage. The analysts continue to monitor ReNew Power’s performance and sector dynamics to provide updated assessments of the company’s stock value. For deeper insights into RNW’s valuation and 12 additional exclusive ProTips, including detailed financial health scores and comprehensive analysis, visit InvestingPro.
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