PL Capital visualises strong growth in the solar equipment space

PL Capital has shared a positive outlook for a strong scope on medium-term growth prospects in the renewable energy equipment manufacturing segment for India’s solar sector. The organisation states that the solar capacity is intended to increase from 106 GW in FY25 to around 290 GW by FY30E. This is mainly due to several factors, including effective policies of the government and increasing demand for solar equipment by the industrials. Moreover, the company also emphasises benefiting from exports to the US as India is ensuring to reduce the supply chain dominance of China. As the manufacturing of solar equipment tends to increase in India, the demand for aluminium is also set to rise. Thus, companies such as Premier Energies, Waaree Energies, and Vikram Solar are investing heavily in the manufacturing of solar equipment products made of aluminium.

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Amid this scenario, PL Capital has initiated coverage on these three companies, assigning “Buy ratings” to Premier Energies and Waaree Energies, and an “Accumulate rating” to Vikram Solar. The brokerage has set the effective prices of INR 1,106 for Premier Energies, INR 4,086 (USD 45.49) for Waaree Energies, and INR 275 (USD 3.06) for Vikram Solar, based on a sum-of-the-parts (SOTP) valuation, implying FY28E price-to-earnings (P/E) multiples of 22x, 24x and 19x, respectively.

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PL Capital is of the view that there is a growth factor within the equipment sector related to renewable energy due to several reasons. The prime reason is the increase inits power generation capacity from 356 GW in FY19 to 475 GW in FY25, along with the exponential increase in the installation of renewable energy sectors. It is expected that the renewable energy sectors to grow from 81 GW in FY19 to nearly 430 GW by FY30E, assisted by the various policy incentives at the central and state levels. This ensures the overall growth of the expansion in the solar capacity from about 106 GW in FY25 to 290 GW by FY30E. In addition, the manufacturing units within India are expected to grow to 180 GW by FY30E.

Moreover, PL Capital noted that Premier Energies, Vikram Solar and Waaree Energies are aggressively expanding their overall capacity and enhancing their backward integration through large-scale investment. Premier Energies has already announced an INR 120 billion (USD 1.3billion) capital expenditure, Vikram Solar is investing a total amount of INR 112 billion and INR 250 billion by Waaree Energies to ramp up modules. With these investments, the company is targeting to increase its modular capacity, along with expanding its backward integration. 

The brokerage said these companies focus on their orders and demand that is dynamic in nature. Premier Energies mainly focuses on domestic demand, Waaree mainly focus on exports and Vikram Solar is supported by both domestic and some international orders. Together, these three companies are significant for their sustainable growth driven by diversified markets, orders and the present expansions.

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