This Solar Penny Stock Zooms 35% in 5 Days on ALMM Buzz. Will the Momentum Continue?

Share price of Surana Solar, a company involved in the business of manufacturing solar photovoltaic modules, hit an important milestone today.

The solar stock hit its highest level in as many as 10 years.

Shares of the company rose 5% today to surpass Rs 44 per share, a level last seen back in 2015!

This means that Surana Solar is more popular today than it has ever been.

I spent hours reviewing Surana Solar, so you don't have to.

Let's find out the key factors driving the rally and what lies ahead for this solar sector penny stock.

ALMM Boost

In a big boost to domestic solar companies, the India's Ministry of New and Renewable Energy (MNRE) this week announced the reimposition of the Approved List of Models and Manufacturers (ALMM), effective from 1 April 2024.

This basically means that solar rooftop and open access projects will have to procure modules from ALMM approved manufacturers.

This is a big positive for all the solar module manufacturers enlisted under the ALMM.

To give a little context... ALMM was suspended from March 2023 due to concerns over an inadequate supply of domestically made modules to meet demand.

The ALMM was set to be reimposed from April this year, as announced by MNRE in February 2024. Only back then, MNRE stated that the ALMM would not apply to projects "set up under open access" and rooftop solar projects by private parties.

However, the latest announcement from MNRE has brought about a change, eliminating these exemptions for these projects.

Among the listed companies, the manufacturers enlisted under the ALMM include -

• Alpex Solar
• BHEL
• Insolation Energy
• Solex Energy
• Tata Power (Tata Power Solar)
• Websol (via solar subsidiary)

While Surana Solar is not a part of this list, it seems the company has received a big boost from this ALMM development.

Strong Growth Prospects and Q3 Performance

For the quarter ended December 2023, Surana Solar delivered exceptional performance across key metrics.

The company's net profit soared by 267% to Rs 1.1 million (m) compared to Rs 0.3 m reported in the year ago period.

In the past 5 years, the company has managed to increase margins, more so in FY23, owing to good demand.

This year though, the company faced a heavy loss in the second quarter, which could dent its margins for FY24.

Financial Snapshot

Rs m, standalone	FY19	FY20	FY21	FY22	FY23
Net Sales	347.38	331.69	279.42	248.31	421.83
Growth (%)	-11%	-5%	-16%	-11%	70%
Operating Profit	61	66	58	48	61
OPM (%)	18%	20%	21%	19%	15%
Net Profit	10	6	2	8	23
Net Margin (%)	3%	2%	1%	3%	5%
ROE (%)	1.9	1.1	0.4	1.6	4.1
ROCE (%)	4.2	2.4	2.0	2.8	5.7
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	0.4	0.1	0.1	0.2	0.0

Data Source: Ace Equity

Immediately after the Ram Mandir consecration in January this year, Prime Minister Modi set the ball rolling for solar stocks on a new scheme to boost rooftop solar installations.

Here's him outlining the plan.

• Today, on the auspicious occasion of the consecration of life in Ayodhya, my resolve has been further strengthened that the people of India should have their own solar roof top system on the roof of their houses.
  
  The first decision I have taken after returning from Ayodhya is that our government will launch 'Pradhan Mantri Suryodaya Yojana' with the target of installing rooftop solar on 1 crore houses.

This is big. Just to put things in perspective, only about 7 lakh households are estimated to have rooftop solar installations currently. Modi's new scheme proposes to multiply this number by a whopping 15x.

No wonder, stocks like Surana Solar, which have expertise in this area, have suddenly become the new favourites with the investors.

Solar companies are changing businesses and homes across the globe.

Surana Solar, a fast-growing solar stock, offers potential solutions in this space.

The company's focus on comprehensive solar solutions in the face of escalating demand in the sector makes this stock promising.

However, investors should know that the company has paper thin margins and it's just starting to show improvement across business verticals.

In the December 2023 quarter, the company returned to black and posted a net profit of Rs 1 million compared to a loss of Rs 15 million in the September 2023 quarter.

While still relatively small, Surana Solar stands to benefit as it makes big moves in the solar segment.

How Surana Solar Share Price has Performed Recently

In the past five days, Surana Solar share price has zoomed more than 35%.

In a month, the stock is up 40%.

Surana Solar touched its 52-week high of Rs 44.5 today and a 52-week low of Rs 16.9 back in April 2023.

In the past one year, Surana Solar share price has surged 150%!

Here's a table comparing Surana Solar with its peers -

Comparative Analysis

Company	Surana Solar	CWD	Fine-Line Circuits	Gujarat Poly	Incap
ROE (%)	4.1	10.8	0.9	116.3	4.2
ROCE (%)	5.7	14.4	4.6	116.7	6.3
Latest EPS (Rs)	-0.2	5.9	0.1	3.4	1.2
TTM PE (x)	0.0	112.4	0.0	19.3	61.1
TTM Price to book (x)	3.7	11.5	4.2	6.6	2.2
Dividend yield (%)	0.0	0.0	0.0	0.0	1.4
Industry PE	90.7
Industry PB	5.6

Data Source: Ace Equity, Equitymaster

About Surana Solar

Surana Solar is engaged in the business of manufacturing solar photovoltaic modules, generation of wind and solar power energy and trading of other solar related products.

The company has two manufacturing plants in Hyderabad.

Shares of the company saw a sharp spike after Modi announced plans for solar rooftop panels. Today again, they're locked in 5% upper circuit.

To know more, check out Surana Solar's financial factsheet and its latest quarterly results.

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...