What to Expect from India's Top Renewable Energy Stocks in 2023

The renewable energy (RE) theme has picked up pace in India, with the country quickly becoming one of the world leaders in embracing the transition to renewable energy.

What started as a renewable energy target of 225 GW by 2022, was upgraded to 450 GW by 2030. This was complemented by earnest policy reforms.

Some of the top business houses in the country also made commitments to invest in this space such as state-owned NTPC, Adani Green Energy, Tata Power and Reliance.

Last year we wrote to you about what to expect from India's top renewable energy stocks in 2022.

We mentioned the leading companies in the space and their plans in the coming years. While the list is still relevant for 2023, we have made some changes.

Here is a list of the top 3 renewable energy stocks and what you can expect from them in 2023.

#1 Websol Energy

First on our list is Websol Energy.

Websol Energy is a leading manufacturer of photovoltaic monocrystalline solar cells and modules in India.

When we last wrote to you, the company was well on its way to expand its capacity in 2022. While the expansion plans are still on track the company intends to more than seven-fold their existing capacity (around 250 MW) to retain its position as one of the largest producers of solar cells in India.

Moreover, it has outlined ambitious plans to mobilise funds for upgrading its existing equipment with the latest and most efficient technology. This places the company well to profit from the green energy revolution.

Websol went into business as a fully export-oriented unit catering to Europe (mainly Germany and Italy) and the US. They have been in this business for over two decades now and enjoy a reputation for high-quality products. They offer a wide array of products ranging from 5 W to 220 W, catering to the demands of home, commercial and industrial institutions.

While the company has increased its sales by 38.8% in the last year the net profit dropped 80%. But this is an aberration as margins didn't fall much in the financial year 2022.

However, the company's profits were higher in the financial year 2021 due to a one-time exceptional item which make 2022 look bad. The balance sheet is well funded with negligible debt on the books.

Websol Energy Financial Snapshot (2018-2022)

	2017-2018	2018-2019	2019-2020	2020-2021	2021-2022
Revenue Growth (%)	-47.90%	-55.80%	140.50%	-23.50%	37.90%
Operating Profit Margin (%)	15.10%	-10.60%	7%	24.80%	14.60%
Net Profit Margin (%)	2.60%	-42.20%	2.10%	32.20%	4.50%
Return on Equity(%)	6%	-25.80%	3.30%	33.10%	5.30%
Debt to Equity (x)	0.8	0.61	0.62	0.2	0.19

Data Source: Ace Equity

The company's patchy past performance is largely owing to weak power demand, intense competition from China and the pandemic.

Now, with the ongoing capacity expansion, the company is unlikely to churn out a profit in the near term. However, this should be temporary, considering the new capacity will make them highly efficient and well-poised to benefit from this investing megatrend.

To know more about the company, check out its factsheet and latest quarterly results.

#2 Sterling and Wilson

Next on our list is Sterling and Wilson Solar.

Sterling and Wilson Solar is a global holistic solar engineering, procurement, and construction (EPC) solutions provider with a wide presence across 26 countries.

The company's unexecuted EPC order book stood at Rs 26 billion (bn) as of October 2022, with nearly 78% domestic EPC, indicating healthy growth in business in the coming year.

The domestic business offers wider margins and is likely to boost profits. This in tandem with sliding input costs bodes well for the company in the coming years.

Back when we wrote to you, the company had two large EPC projects with a total capacity of 400 megawatts (MW) being constructed in the US.

However, the activity had stalled in the first half of 2022 due to Department of Commerce's investigation on import of modules. But the new directive in June 2022 has given relief to module imports allowing the company to continue its work.

Sterling and Wilson Solar has added significant capacity which will come online by the end of the financial year 2023. Moreover, it's expanding its renewable energy offerings to include EPC solutions for hybrid energy power plants, energy storage and waste to energy.

The unprecedented commodity super cycle over the last two years coupled with the pandemic led to solar Industry suffering huge losses. The company is incurring a loss at the net level.

Sterling and Wilson Renewable Energy Financial Snapshot (2018-2022)

	2017-2018	2018-2019	2019-2020	2020-2021	2021-2022
Revenue Growth (%)		22.70%	-30.40%	-10.90%	1%
Operating Profit Margin (%)	8.80%	11.20%	12.10%	-2.90%	-13.90%
Net Profit Margin (%)	6.60%	7.70%	5.50%	-5.70%	-17.60%
Return on Equity(%)	229.20%	123.00%	31.70%	-33.30%	-116.30%
Debt to Equity (x)	0.94	2.65	1.13	0.71	0.48

Data Source: Ace Equity

However, this is likely to change with the fresh set of announcements. The solar installations have grown at 15% CAGR in the past five years and are likely to replicate the same going forward.

Moreover, the company's strong balance sheet will also assist it grow further.

To know more about the company, check out its factsheet and latest quarterly results.

#3 Borosil Renewables

The third company on our list is a new entrant, Borosil Renewables.

Borosil Renewables is the first and only solar glass manufacturer in India.

The company has chalked out an expansion plan which will take its Indian capacity of 450 TPD (tonnes per day) to 1,000 TPD by October 2022 and 2,100 TPD by the financial year ending 2025. This will result in a capital outlay of around Rs 15 bn.

Moreover, it recently acquired the Interfloat group, the largest manufacturer of solar glass in Europe, with an operational manufacturing capacity of 300 TPD in Germany.

It plans to increase this to 500 TPD by 2023. While this may seem ambitious, the company has achieved such a feat.

Borosil Renewables Financial Snapshot (2018-2022)

	2017-2018	2018-2019	2019-2020	2020-2021	2021-2022
Revenue Growth (%)	10.00%	-21.90%	5.80%	84.80%	31.00%
Operating Profit Margin (%)	25.60%	30.40%	14.80%	40.40%	41.10%
Net Profit Margin (%)	15.70%	18.40%	0.20%	17.80%	25.70%
Return on Equity(%)	5.80%	8.10%	0.10%	19.20%	23.80%
Debt to Equity (x)	-	0.13	0.29	0.13	0.2

Data Source: Ace Equity

The company's sales have grown by 28% in the past year, recovering well from the slowdown due to the pandemic. However, the profits have skyrocketed, doubling in the same period.

The strong profitability has boosted the return on equity. It's up from 14% in the financial year 2021 to 21% in the financial year 2022.

The company boasts a strong balance sheet with low debt-to-equity of 0.2x. The interest coverage ratio is very high at 79.5x in the financial year 2022.

To know more about the company, check out its factsheet and latest quarterly results.

In conclusion

The renewable energy sector continues to remain a favourite among industrialists and investors across the world.

The high-ticket investments have placed the sector, and the companies operating in it, on the fast track to growth in the coming years.

The plans of a company are a great insight into its long-term vision. They help in analysing and understanding the steps it would take to achieve the same.

Therefore, an investor must pay extra attention to these plans. Analyse them well to comprehend whether the company's roadmap is feasible or not. Only then can you make the right choice.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...