5 Renewable Energy Stocks to Watch Out for Potential Multibagger Returns

Rising environmental issues have forced us to think about more sustainable alternatives.

Be it a shift from plastic bags to paper and cloth bags or coal to solar and wind energy, we've all been thinking 'green'.

Renewable energy, green hydrogen, and electric vehicles promise a safe future. Though new to the market, developments in these emerging themes are happening at a very fast pace.

A lot of money is being invested in capturing the growing demand for green energy.

We have shortlisted five companies that are betting big on the renewable energy theme. Read to find out whether they have the potential to become future multibaggers.

#1 Indian Energy Exchange

First on our list is the Indian Energy Exchange (IEX), India's first energy exchange company.

IEX provides a trading platform for the power market in India. It's a monopoly and has around 95% market share in the energy exchange market.

The company allows participants to trade electricity through short-term contracts of 15-minutes, intra-day, day-ahead, and daily contracts.

IEX has been playing a significant role in supporting the transition to renewable energy. It issues renewable energy certificates (REC) to renewable energy providers. A certificate is issued for every megawatt-hour (MWh) of green electricity generated.

In 2020, IEX also introduced trading in green energy through four types of term-ahead and day-ahead contracts. This will support renewable energy generators and distributors to trade easily in renewable energy.

Moreover, this market encourages states with surplus renewables to sell so buyers can generate renewable energy.

Currently, green energy trading accounts for only 7% of total power trading. IEX aims to increase it to 25% by 2024.

The company is supporting renewable energy integration through the real-time market (RTM), which the company launched in 2020.

The company's efforts to support the transition to renewable energy have paid off. In the financial year 2022, the green market saw a 5x increase in volumes. In RTM, renewable energy accounted for 20% of the total volumes, the highest since its launch.

In the last three years, IEX's revenue has grown by 17.7% (compound annual growth rate (CAGR), led by growth in trading volumes.

The net profit also jumped by 20.5% (CAGR). IEX is also a zero-debt company, leaving scope to rely on debt to support its future growth.

Recently, the company launched value-added services such as forecasting and solutions for renewable power producers.

Going forward, the company's renewable energy share in total power volumes is expected to increase due to the government's 500 GW target by 2030.

While IEX share price has fallen in 2022, its performance since inception (in 2017) shows gains of around 170%.

To know more about IEX, checkout its factsheet.

#2 Tata Power

Second on our list of renewable energy stocks is Tata Power.

It's engaged in the business of power generation, transmission, and distribution.

The company also manufactures solar panels and is setting up electric vehicle (EV) charging stations across the country.

Tata Power currently generates electricity through conventional and renewable resources.

As on 31 March 2022, its power portfolio comprises 68% conventional and 32% renewable energy.

It aims to become the preferred renewable energy company by producing electricity only through renewable sources.

Currently, it has an installed capacity of 3,400 megawatts (MW) of renewable energy and 10,115 MW of conventional energy. It plans to increase this to 30,000 MW by 2027.

It recently announced a Rs 750 bn capex for the same. This will increase its renewable energy capacity from 32% to 60% by 2027 and 80% by 2030.

Apart from this, Tata Power aims to contribute zero waste to the landfill before 2030, become 100% water neutral by 2030, and carbon net-zero by 2045.

Moreover, the company plans to establish 1 lakh EV charging stations by 2026.

To expand its solar engineering procurement and construction (EPC) business, it is setting up a 4 gigawatt (GW) plant with a capex of Rs 30 bn in Tamil Nadu.

All these efforts indicate Tata Power is betting big on renewable energy. While it remains to be seen how the company's investments will span out, its past investments surely paid off.

In the last three years, its revenue has grown at a CAGR of 13.1% on account of a growing share of the renewables and solar EPC business. The net profit also grew 23.2% during the same time.

Its debt-to-equity ratio in 2022 was 1.5x, but this might go up due to its heavy capex plans. However, being a part of the cash-rich Tata Group, the company funding these projects is not going to be a big task.

Going forward, its expansion plans will drive its revenue and profit in the medium term.

Shares of Tata Power were trading at Rs 27 in May 2020 and have jumped almost 700% since then.

To know more about Tata Power, checkout its factsheet.

#3 Borosil Renewables

Next on our list is Borosil Renewables, the first and only manufacturer of solar glass in India.

The glass it manufactures is used in photovoltaic panels. Currently, it has a 40% market share in the domestic market and exports its products to the USA, Turkey, and Europe.

Its current capacity is 450 tons per day (TPD), equivalent to an annual production of 2.5 GW solar modules. The company is adding 550 TPD, operational in 2023, and another 1,100 TPD by 2025. This will increase its total installed capacity to 2100 TPD by 2025.

Apart from this, it's in the process of exploring power sourcing through a hybrid wind-solar plant.

India imports most of its solar glass from China and Malaysia. Being the only domestic solar glass manufacturer, Borosil Renewables benefits from this.

In the last three years, its revenue has grown at a CAGR of 34.2%, driven by volume growth. The net profit has also grown at a whooping rate of 592.2%.

The company's balance sheet is also quite strong. Its debt-to-equity and interest coverage ratio stood at 0.2 and 79.5, respectively, in the financial year 2022.

Borosil Renewables stands to benefit from the government's solar mission and the product-linked incentive (PLI) scheme.

Apart from this, high demand for solar panels, anti-dumping duty on solar tempered glass imports, and emerging trends such as EVs will drive the company's growth.

In March 2020, the shares of Borosil were trading at Rs 25. Currently, they are trading at Rs 584, a whopping 1,960% return in two and a half years.

To know more about Borosil Renewables, checkout its factsheet.

#4 NTPC

Fourth on our list is India's largest power company, NTPC.

This government-owned company is engaged in the business of the generation and sale of electricity.

It also ventured into coal mining, oil and gas exploration, energy trading, and project management and consultancy services through its subsidiaries.

As of 31 March 2022, it has a total installed capacity of 68,962 MW and caters to around 24% of India's electricity needs. Of this, the renewable energy capacity is around 2,332 MW.

Apart from this, 1,295.5 MW of renewable energy projects are under implementation.

To further widen its renewable energy portfolio, the company announced that it received approval to set up one of the largest renewable energy parks with a capacity of 4,750 MW in Gujarat.

NTPC also partnered with the Indian Oil Corporation (IOC) to generate and store renewable energy.

Moreover, the company is venturing into green hydrogen space with its projects in Leh and Vindhyachal.

All these efforts from the largest power-generating company will surely help the government's 500 GW renewable energy goal.

In the last three years, this government-owned entity's revenue has grown at a CAGR of 5.3%, driven by higher power generation. The net profit also grew by 11.5% during the same time.

As of 31 March 2022, its debt-to-equity ratio stood at 1.3x. However, steady cashflows due to the cost-plus nature of the tariffs will ensure debt metrics are stable.

Going forward, the high electricity demand will drive its revenue and profits in the medium term. Its growing renewable portfolio will help the company retain its title as the country's largest power company.

After the market crash in 2020, the shares were trading at Rs 76. Currently, they are trading at Rs 163, giving its investors a 115% in the last two years.

To know more about NTPC, checkout its factsheet.

#5 JSW Energy

Last on our list is JSW Energy, part of the JSW Group. It is engaged in the business of generating power.

It generates power from thermal, hydro, and solar sources and has a total installed capacity of 4.6 GW. Of this, 3.1 GW is from thermal, and 1.4 GW is from hydro and solar.

In 2021, the company reorganised its business and separated its green business. As a result, all its renewable energy operations will be managed by its wholly owned subsidiary JSW Energy Neo.

This company will focus on generating renewable power, energy storage, and green hydrogen.

There are currently 2.5 GW renewable energy projects under construction, including both wind and solar projects.

Apart from this, the company also invested in a 240 MW Kutehr hydro project expected to be operational in the financial year 2024. With this project, the total portfolio will increase to 9.1 GW, of which 65% will be renewable energy.

The company targets 10 GW of installed capacity by 2025. It's already running ahead of its timelines.

It's also planning to reduce its carbon footprint by 50% by 2030 and become carbon neutral by 2050.

JSW Energy's revenue grew by 22% in the last year, driven by long-term power purchase agreements. The net profit also grew by 115.4% during the same time. Despite investing heavily, the company's debt-to-equity ratio is 0.4x.

Going forward, growth in the renewable portfolio and long-term power purchase agreements will drive the company's revenue and profits.

The shares of JSW Energy were trading at Rs 39 in May 2020, they grew by a whopping 781.9% in just two years to reach Rs 345.

To know more about JSW Energy, checkout its factsheet.

Will renewable energy stocks turn out to be potential multibagger stocks?

The renewable energy theme is considered to be one of the biggest investment themes.

There is massive scope for growth in this industry. Top investing gurus like Charlie Munger also believe the future depends on green energy.

It's no wonder that everyone is betting on this industry.

Before investing in any company, be sure to check the company's financials, management, and growth prospects.

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...