Waaree Renewable Technologies: Leading the Charge in India's Solar Revolution

Solar stocks have been abuzz for the past few days, with most of them surging over 15-40%.

The excitement around solar stocks comes after significant developments, including Prime Minister Modi unveiling of a new scheme to electrify 10 million (m) households with solar power.

This ambitious initiative presents a massive opportunity, especially considering the current count of fewer than 1 m households with rooftop solar installations.

Additionally, the government's proactive stance on supporting the solar sector is evident through earnest policy reforms and budgetary allocations.

A substantial amount of Rs 195 billion (bn) was allocated for the Production Linked Incentive (PLI) scheme, aimed at boosting the manufacturing of high-efficiency solar modules.

The government's 'Pradhanmantri Surydaya Yojana' in the Union Budget of 2023-24, aims to generate electricity through solar power, promising significant savings for households opting for rooftop solar systems.

Concerns regarding imports from China have been mitigated, thanks to India's expanding solar manufacturing sector and the 'Make in India' initiative.

A large part of this push comes from the government's ambitious target of 450 gigawatts (GW) of renewable energy capacity by 2030, and the solar sector is likely to benefit in a big way.

With these policy interventions and the potential for substantial savings for households, the solar sector is poised for remarkable growth.

As a result, investors are increasingly turning their attention to top Indian listed companies in the solar space, anticipating favourable returns.

For investors seeking to capitalize on this decade's investing megatrend, this company in the sector cannot be overlooked.

Front-Runner In The Booming Solar Energy Market

Waaree Renewable Technologies is a leading player in solar engineering, procurement and construction (EPC). Additionally, it serves as a solar developer, engaging in financing, constructing, owning and operating solar projects.

It excels across the entire solar value chain, right from manufacturing cells/modules and solar products to executing rooftop and utility-scale solar projects.

The company has powered more than 10,000 homes through various government schemes in India and 400+ projects in India and internationally.

To meet the substantially increasing demand for solar energy, it has planned to set up more than 1000 centres for solar solutions throughout the country.

Waaree Renewable Technologies has emerged as one of the largest wealth generators. Rs 1 lakh invested in the stock in January 2021 (at Rs 20 per share) would now stand at an astounding Rs 22 million (Rs 2.2 crores), an incredible 220-fold return over three years!

And while the stock continues to soar to new heights every few months, the company holds promising prospects for investors.

Positive News Ignites Rally, Split Rumours Heat Up

The parabolic movement in the stock comes on the back of a series of positive developments.

In January 2024, the company announced that it was considering a stock split.

In December 2023, the company inked a significant agreement with Australia's 5B Industries to manufacture solar products in India.

This collaboration is expected to facilitate the commercialization of the innovative 5B Maverick solar product, enabling local production, scalability and competitive deployment in India to cater to both domestic and international developers and EPC companies.

Furthermore, the company secured a letter of intent from a leading glass and window solutions firm for the turnkey execution of a 4.27-megawatt (MW) solar power project.

Moreover, in November 2023, Waaree Renewable Technologies secured a letter of award worth Rs 1.8 bn from an integrated, specialized seamless tube manufacturer in India.

These recent wins and the news of the stock split have led to a 3x surge in the stock price since November 2023 alone.

Apart from the recent wins the company's robust financial performance has also contributed to its stellar performance in the past.

Waaree Renewable Technologies Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	273.00%	-2.80%	109.20%	1001.30%	107.60%
Operating Profit Margin (%)	52.90%	36.40%	72.60%	19.70%	24.30%
Net Profit Margin (%)	-27.20%	-55.90%	-18.20%	5.50%	15.80%
Return on Capital Employed(%)	10.50%	1.70%	7.50%	26.70%	84.10%
Return on Equity (%)	-19.60%	-18.00%	-9.80%	34.10%	96.90%

Data Source: Ace Equity

Between 2021-2023, Waaree Renewable Technologies' sales have multiplied 22 times. The company has turned the business around, reporting a profit after 3 years of continuous losses (2019-2021).

This surge in profits has helped the company trim down its total debt, strengthening the balance sheet.

Smooth Sailing if Debt Remains Sustained

The debt-to-equity ratio has come off substantially, from 5.3x in fiscal 2021 to 0.5x in fiscal 2023, helping the company expand on a strong footing.

As of June 2023, Waaree Renewable Technologies has served a total of 407 customers in India and 20 abroad. The company boasts a track record of supplying over 6GW solar modules and commissioning more than 1.1GW of solar EPC projects.

As of December 2024, the company has an unexecuted order book of 749MW peak (fiscal 2023 - 856MW peak), with successfully executed orders totalling 473MW peak in the first nine months of fiscal 2024.

Their current bidding pipeline stands at an impressive 9 gigawatts, with a conversion rate ranging between 30% to 40%, providing clear visibility of future growth prospects.

Moreover, the significant growth projections in the solar sector pave the way for further expansion.

According to industry projections, by 2027, the solar energy capacity is anticipated to soar to approximately 206 GW, a substantial increase from the current 65 to 70 GW. Waaree Renewable Technologies, a significant contributor to the sector's expansion, positions the company on the fast track to growth.

The global solar EPC market reached a substantial US$ 221.5 bn in 2022 and is forecast to expand at a 6.1% CAGR between 2023 and 2032, with a projected value of US$ 398.7 bn by 2032.

Closer to home, a steady issuance of annual bids, with a focused aim of targeting 40 GW of solar energy capacity each year is projected to span from fiscal year 2024 through fiscal year 2028, emphasizing a multi-year dedication to the growth of solar installations.

In this landscape, Waaree Renewable Technologies, leading industry player, stands to benefit the most. With its established expertise and capabilities across the solar value chain, the company is well-positioned to capitalize on the expanding opportunities within the global and domestic solar markets, driving its growth trajectory further.

Presently, the stock is trading at a Price to Earnings ratio of 83x. In terms of enterprise value to earnings before interest, taxes, depreciation and amortization ratio (EV/EBITDA), the stock is available at a multiple of 56x, a115% premium to its 5-Yr median of 26x.

In Conclusion

Waaree Renewable Technologies, a gem in the solar sector, is well-positioned to reap significant benefits from the flourishing expansion in the coming years.

The company's strong financials and diverse clientele with a focus on supplying crucial components, present an optimistic outlook.

However, the recent run-up in the stock price indicates that investors may have already factored in the bright outlook, possibly limiting the upside in the stock price in the near term.

Nevertheless, for investors with a long-term perspective, the company could make for an interesting prospect in the thriving renewable energy sector.

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