This Solar Stock is Up 500% in 2024. Here's What Comes Next

There's enormous advantage in buy-and-forget approach to investing.

It helps outweigh churning your portfolio in the pursuit of higher returns.

Later, the power of compounding works it wonders... that is if you've done your due diligence and zeroed in on the right stock.

Of course, all this is easier said than done.

Luckily, we got to be in this situation not long ago when we wrote about a renewable energy stock, especially involved in the solar segment.

In early February 2024, we wrote about a niche renewable energy stock that commands these metrics:

Revenue growth over the past 5 years -

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Revenue Growth	441%	-19%	128%	1144%	117%

Source: Equitymaster

Not just that... it has a return of equity (ROE) of 97% and its return of capital employed (ROCE) stands at 84%.

If that wasn't enough, the company has brought down its debt-to-equity ratio from 4x in FY19 to 0.5x at present.

No wonder the stock is up almost 1,400% in the past 1 year and around 950% in the past 5 months.

In case you're still wondering, we're talking about Waaree Renewable Technologies.

The stock has suddenly come under investors' radar after surging over 85% in the past 1 month.

Waaree Renewable Technologies: Leading India's 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 1,000 centres for solar solutions throughout the country.

Waaree Renewable Technologies has emerged as one of the largest wealth generators in the recent past.

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

What's Driving the Sudden Optimism in Waaree Renewable Technologies?

As mentioned above, the stock has rallied around 85% in the past 1 month alone. The recent gains come after the company underwent a stock split two weeks ago.

The company undertook a stock split to enhance the liquidity in the capital market, widen the shareholder base and make the shares affordable to small investors.

Once trading at more than Rs 5,000, the stock currently trades at Rs 2,700 per share.

Now that the shares have become more affordable, the number of investors have increase.

A stock split is done, primarily to make the stock more affordable for the small retail investors and increase liquidity.

Apart from stock split, shares of the company have also rallied on the back of multiple orders received in the past one month.

Waaree Renewable Technologies recently secured an EPC contract for a solar power plant of 980 MWp. The contract was valued at Rs 9.9 billion (bn).

Last month, it also received another order worth Rs 14 bn from North Eastern Electric Power Corp.

This one's for the execution of EPC work with land development of ISTS-connected ground-mounted solar PV project of 300-MW-AC.

In recent quarters, higher orders have led to higher revenue on the back of improved execution.

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 massive surge in the stock price since November 2023.

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

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	70	57	130	1,615	3,510
Growth (%)	441%	-19%	128%	1144%	117%
Operating Profit	37	21	94	318	853
OPM (%)	53%	36%	73%	20%	24%
Net Profit	-19	-32	-38	86	554
Net Margin (%)	-26%	-56%	-29%	5%	16%
ROE (%)	-19.6	-18.0	-9.8	34.1	96.9
ROCE (%)	10.5	1.7	7.6	26.7	84.1
Dividend (Rs)	0.0	0.0	0.0	0.2	0.2
Debt to Equity (x)	4.0	1.5	5.3	1.4	0.5

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, Valuations a Big Concern

The company's debt-to-equity ratio has come off substantially, helping Waaree Renewable expand on a strong footing.

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.

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.

However, valuations have shot up multifold along with its earnings. Presently, the stock is trading at a PE ratio of 270x making it ones of the most overvalued stocks in India.

In terms of book value, the stock is trading at a book value multiple of 161x, which is again bizarre.

Here's a table comparing Waaree Renewable Tech with its peers -

Comparative Analysis

Company	Waaree	BF Utilities	GVK Power	India Power Corp	IEX
ROE (%)	96.9	0.0	0.0	2.3	41.6
ROCE (%)	84.1	32.1	74.0	5.5	53.8
Latest EPS (Rs)	10.2	36.7	0.5	0.2	3.8
TTM PE (x)	269.5	21.8	20.2	108.8	41.3
TTM Price to book (x)	161.5	22.8	-2.2	3.3	14.7
Dividend yield (%)	0.1	0.0	0.0	0.3	0.6
Industry PE	26.8
Industry PB	3.8

Data Source: Ace Equity

The recent run-up in the stock price has made investors wonder whether all the positives have already been factored in.

Nevertheless, the stock could continue to remain in favor as the company's upcoming capacities are expected to support growth in the current financial year.

Moreover, the company also has plans for setting up a green hydrogen plant.

Additionally, you can't forget about Waaree Energy's upcoming IPO.

The Waaree group's flagship company, which manufactures solar PV modules and provides solar energy solutions in India, is all set to come out with its IPO this year.

In December 2023, Waaree Energies filed its DRHP with the regulator to launch its IPO. The company is looking to raise Rs 37 bn via the IPO route.

Waaree Renewable Tech has several collaboration agreements with Waaree Energies.

How Waaree Renewable Technologies Share Price has Performed Recently

In the past 5 days, the stock has gained 12%. In a month, the stock price has rallied 86%.

Waaree Renewable Technologies has a 52-week high of Rs 3,038 touched on 26 April 2024 and a 52-week low of Rs 157 touched on 23 May 2023.

In 2024 so far, the stock price has rallied 526%.

In the past 1 year, Waaree Renewable Technologies is up 1,391%!

About the Company

Waree Renewable Technologies is a leading solar company boasting the nation's largest solar panel manufacturing capacity with its manufacturing plants in Chikhli, Surat, and Umbergaon.

So far, the company has completed 10,000+ projects in pumps, telecom & rooftops.

Its long list of clientele includes some of the prestigious names like L&T, Bharat Petroleum, Aditya Birla Group, ArcelorMittal, and Reliance Industries, among others.

The company has a 900+MW O&M portfolio of solar power plant assets. Further, it has a good track record for 99%+ plant availability.

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

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...