Shares of Premier Energies and Waaree Energies fell up to 2 percent each in the morning on January 8 after Kotak Institutional Equities initiated coverage on the two renewable energy companies by recommending a 'sell' call for both.
The brokerage has set a target price of Rs 2,550 for Waaree Energies, indicating an 8 percent downside from Tuesday’s closing price. For Premier Energies, the target is Rs 770, suggesting a steeper decline of 41 percent from current levels.
Follow our LIVE blog for all the latest market updates
Despite forecasting a strong Compounded Annual Growth Rate (CAGR) of 44 percent for Premier Energies between FY24 and FY30, Kotak cited the stock's high valuations as a concern, driving its bearish stance. The firm also highlighted the potential of India’s solar sector, projecting an 18 percent CAGR in utility-scale solar capacity additions through FY30.
Kotak believes that integrated manufacturers with capabilities spanning from ingots to modules, as well as those with U.S.-based manufacturing, will benefit from a competitive edge in the medium term, enabling stronger profitability. However, elevated valuations remain a key issue for both stocks. For Waaree Energies, the brokerage expects a 35 percent earnings CAGR over the same period but still maintains a "sell" rating.
India’s solar sector is set to grow significantly over the next decade as the country targets 500 GW of renewable energy capacity by 2030. Solar capacity is projected to increase from 82GW in FY24 to 214GW by FY30, driven by utility-scale projects, rooftop installations, solar pumps, and captive industrial use.
Also read: Demat account growth falls to four-quarter low; sees sharpest decline ever
Indian solar equipment manufacturers are well-positioned to benefit from this expansion, supported by favourable domestic and international policies. Key drivers include import tariffs on Chinese solar products, local requirements like ALMM and DCR in India, and the Uyghur Forced Labor Prevention Act in the US, the Kotak report said.
Kotak Institutional Equities highlights that current margins and returns in most manufacturing categories are attractive. However, with several companies planning to expand capacity, margins and return ratios could stabilize in the medium term. Integrated manufacturers covering the entire supply chain, from ingots to modules, and firms with manufacturing facilities in the US, are expected to maintain better profitability and utilization rates over time.
Since listing, Premier Energies’ stock has surged nearly 190 percent from its IPO price of Rs 450, while Waaree Energies has almost doubled from its issue price of Rs 1,503. However, Kotak’s analysis suggests that both stocks may have outpaced their fair valuations.
Read more: Sebi asks IPO-bound companies to disclose whistleblower complaints
On the other hand, shares of Waaree Energies were off to a rocking start on its stock market debut on October 28 after listing at Rs 2,500, commanding a massive premium of 66.3 percent over the issue price of Rs 1,503 per share on the National Stock Exchange (NSE). The listing gains, however, missed grey market estimates where shares were trading at a premium of 84 percent.
At 11:20 am, shares of Premier Energies were trading at Rs 1,276, lower by 2.2 percent from the last close on the NSE. Waaree Energies shares traded at Rs 2,720, lower by 2 percent from the last closing price.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
