This Solar Stock is Up 40% in 3 Days. Is There More Room to Run?

To investors,

Today, I want to do a deep dive analysis on India's second largest integrated solar cell and module manufacturer.

If you haven't guessed it already, the company is none other than Premier Energies.

The company, which recently raised funds via an initial public offering (IPO) and debuted on BSE and NSE, has stolen the show and is getting more traction compared to prominent solar players like Tata Power.

It's because Premier Energies is so much more than just a solar cell manufacturer.

So let's take it from the top and discuss all things about Premier Energies... what exactly makes it stand out, what are the company's growth prospects and so much more...

About Premier Energies

Established in 1995, Premier Energies stands out as a leading integrated solar cell and solar module manufacturing company, thriving on innovative technology.

With backing from GEF Capital, a prominent Private Equity Investor in Washington DC, Premier Energies pioneers photovoltaic solutions.

It has five manufacturing facilities, all of which are situated on the land it owns in Hyderabad, India.

Further, one of its manufacturing facilities is India's first LEED gold rated solar manufacturing facility as certified by the US green building council.

The company's manufacturing facilities have an annual installed capacity of 2 GW for solar cells and 4.13 GW for solar modules.

Coming to its clients, some of the renowned names include NTPC, Tata Power Solar Systems, Panasonic Life Solutions, Shakti Pumps, Luminous, etc.

As can be seen from the above names, the company has a diversified range of customers which require Premier Energies' offerings including IPPs, OEMs and off-grid operators.

The Company's IPO

Premier Energies came out with its IPO last month, which was open from 27 August 2024 to 29 August 2024.

It raised Rs 28 billion (bn) from this IPO, primarily to finance the establishment of a new 4 GW Tunnel Oxide Passivated Contact solar cell and module manufacturing facility in Hyderabad.

The company had set the price band at Rs 450 per share at the upper end.

Now, investors who received allotment made a killing (quite literally) as shares of Premier Energies staged a solid market debut, delivering multibagger returns on the listing day itself.

The stock was listed at Rs 991 per share on the BSE, a premium of 120% over its issue price.

The rally didn't stop there as the stock bounced back another 15% on the very next day following a massive order win for 8,085 solar water pumping systems.

With this rally, the stock has now gained over 40% in three days.

Before the IPO, the stock was under the spotlight as it had sold a portion of its shares to some investors, days before the IPO opened for subscription. On this, the company's MD had clarified that this was done to meet the excess investor demand, and the decision was within the regulations.

The IPO had received bids worth more than Rs 1.48 trillion compared to Rs 28 bn on offer. The company even became the second company after Tata Technologies to cross Rs 1 trillion in bids during the IPO phase.

That brings us to the most important part... and a big recent development.

Top International Fund Jumps in...

Earlier this year in the month of July, we wrote to you about one of the biggest international funds - Blackrock - buying significant stakes in select listed Indian companies.

These companies include Titagarh Rail Systems and Swan Energy.

Adding to the list is Premier Energies...

You see, Premier Energies received a stellar response from its anchor investors during the IPO. These included big names like Nomura, Abu Dhabi Investment Authority, DSP India, Morgan Stanley, PNB Paribas, HDFC, and ICICI.

Blackrock was also a prominent name. According to reports, National Pension services, which is managed by Blackrock Institutional Trust Company, subscribed to 3.5% of the anchor portion.

While the latest shareholding pattern is not yet available on the BSE, Blackrock would be a name that'll appear on the list of shareholders when the company files its shareholding.

Recent Order Win and Order Backlog

As we mentioned above, the company recently won a big order for solar water pumping systems.

The order is for supply, installation, and commissioning with 5-year comprehensive warranty of 8,085 solar water pumping systems across various districts in Uttar Pradesh.

The order value is around Rs 2.2 billion (bn) which is expected to be executed by March 2025.

This initiative is part of government's Pradhan Mantri Kisan Urja Suraksha scheme, which aims to provide clean energy to more than 35 lakh farmers by solarising their agriculture pump.

As of July 2024, the company had a total order book of Rs 59.3 bn, of which 25% portion includes orders from public sector undertakings (PSUs) and government entities, while the rest is from private players.

The recent order win has taken its order backlog to over Rs 61 bn.

The order book includes some big orders like the 350 MW module supply agreement signed between Premier Energies Photovoltaic and an independent power producer in June 2024 and the order it received from NTPC in December 2023 for the supply of bifacial solar modules.

The Road Ahead...

The company has posted out of the box numbers for the first quarter of FY25.

It has already achieved half of the revenue and almost 85% of the profit for FY24 in the first quarter of FY25.

Financial Snapshot

Rs m, consolidated	FY21	FY22	FY23	FY24	Q1FY25
Net Sales	7,015	7,429	14,285	31,438	16,570
Growth (%)	-	6%	92%	120%	-
Operating Profit	885	537	1,129	5,053	3,580
OPM (%)	13%	7%	8%	16%	22%
Net Profit	235	-144	-128	2,314	1,980
Net Margin (%)	3%	-2%	-1%	7%	12%
ROE (%)	11.6	-6.5	-5.7	52.5	-
ROCE (%)	13.6	3.9	6.0	25.5	-
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	1.6	2.8	3.9	2.2	-

Data Source: Ace Equity

The module manufacturing company is focusing more on backward integration as that's the place to be if you want real margins.

On top of this, the government has added to the positive sentiment by announcing a big news for module manufacturers...

According to reports, the ministry of new and renewable energy is planning to bring out a policy similar to the Approved List of Models and Manufacturers (ALMM) for solar modules for solar cells, for ensuring better quality, and providing a boost to domestic manufacturing.

ALMM is a list of the models and manufacturers from which solar project developers can buy the required equipment.

If this is implemented, it will be a big positive for domestic solar cell manufacturers like Premier Energies and Websol.

In Conclusion

The company's established market presence, over two decades of experience of promoters in the solar industry, healthy demand outlook owing to bright solar prospects, and a massive order book are some of the key positives that are expected to support Premier Energies' growth in the long run.

However, investors should not forget the expensive valuations it trades at.

Comparative Analysis

Company	Premier Energies	Websol
ROE (%)	52.5	-112.0
ROCE (%)	25.5	-54.6
Latest EPS (Rs)	5.1	-28.7
TTM PE (x)	213.4	0.0
TTM Price to book (x)	14.2	35.3
Dividend yield (%)	0.0	0.0

Data Source: Ace Equity, Equitymaster

Ultimately it will all depend on the company's ability to execute and process the order backlog.

The company generates a substantial portion of its revenue from just two product categories namely solar cells and modules. So the continued success and demand for these products are critical for sustaining its business operations.

Also, the previous ALMM scheme has received some backlash saying despite putting restrictions on China, Chinese players continue to find a way to get into Indian markets. So we can't possibly rule out the risk of competition from Chinese imports.

Nevertheless, the Indian government's initiatives such as the production linked incentive (PLI) and the Solar Park scheme have fostered a favorable environment for solar power development and domestic manufacturing.

Investors are willing to pay a higher premium for solar stocks including Premier Energies. The stock is up more than 6% once again today and it has touched a new high of Rs 1,190.

What do you think, dear reader?

Is the rally sustainable or is Premier Energies headed for a Waaree Renewable like fallout?

Do let us know what you think in the comments section below...

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...