Equity Research Report - SURANA SOLAR LIMITED

Summary

Surana Solar Limited manufactures Solar Energy Systems with the focus on solar Photovolatic PV Modules.

Company Overview:

Surana Solar Limited is part of the Surana Group Hyderabad, India. Founded in 1978, the Surana Group is one of the Country's leading Industrial Companies and a strong well-diversified conglomerate which is active in the areas of Solar & Wind Power, Telecommunications, Metal Processing and Infrastructure. With its 1200 highly motivated and qualified employees Surana Group assures customer’s satisfaction in terms of product quality and service. Surana Solar provides the world with Solar Products which enable green energy to be used wherever it is needed.

Surana Solar Limited is one of the leading Manufacturers of Solar Photovoltaic Modules in INDIA. The Company is also into EPC of Power Projects on turnkey basis on MW scale.

Currently, we have four Grid Connected Solar Power Plants commissioned in Gujarat and Telangana of 5MW each. Our upcoming Power Projects of 30MW are in pipeline to be set up in Karnataka, Andhra Pradesh and Tamilnadu.

Key Statistics:

Market Cap: Rs. 126 Cr.

Current Price: Rs. 25.7/-

52W High: Rs. 43.2/-

Stock P/E: 149.3

Book Value: Rs. 11.6/-

Dividend Yield: 0%

P/B: 2.2

Face Value: Rs. 5/-

52W Low: Rs. 12/-

Source: www.sharescart.com 

Returns (%):

Source: www.bseindia.com

Shareholding Pattern (%):

Source: www.sharescart.com 

Peer Comparison:

Source: www.sharescart.com 

Growth Drivers:

·         Surana Solar Limited (Formerly known as Surana Ventures Limited) was incorporated in the year 2006, a flagship Company of Surana Group. During the year 2008, the Company entered into the business of manufacture of solar energy systems with focus on solar PV Modules. Pursuant to Scheme of Arrangement the “Solar Undertaking” of Surana Telecom and Power Limited, a Group Company was merged with the Company. The shares of the Company were listed on Stock Exchanges w.e.f 7th January, 2011.

·         The Company has steadily grown over the years with a continued focus on customer satisfaction, evolving itself into country’s one of the most promising mid cap Companies. The Company has manufacturing facilities at Cherlapally and FAB City in Hyderabad which have ISO 9001: 2008 certification accredited by AQA International LLC, Dubai.

·         The Company’s products and systems have been accorded approvals by various test agencies such as EURO TEST Laboratories, TUV INTER CERT and many more. The Company possesses excellent skills and capabilities in providing complete EPC solutions for large, commercial solar power plants of megawatt scale.

·         India has tremendous potential in renewable energy. As part of Paris Climate Agreement, India has committed to achieve forty percent of its installed electricity capacity from non-fossil fuels by 2030. For achieving this goal, India has set an ambitious target of 175 GW of installed renewable energy (RE) capacity, including 100 GW of solar power, by 2022. India has also set a target of 450 GW installed RE capacity by 2030. As per the Central Electricity Authority’s Optimum Energy Mix report, the electricity requirement of the country by 2029-30 will be 817 GW, including the 450 GW from renewable energy sources, out of which 280 GW would come from solar energy. To achieve the target of 280 GW, around 25 GW of solar energy capacity is needed to be installed every year, till 2030.

·         The Government is committed to increased use of clean energy sources and is already undertaking various large-scale sustainable power projects and promoting green energy heavily with a target to reduce the emissions intensity of GDP by 33% - 35% below the 2005 levels and increase share of non-fossil fuel in total capacity to 40% by 2030.

·         The government’s goal of installing 175 GW of renewable energy, 100 GW of which is solar capacity, by 2022 looks achievable with the right policies and participation of the industry. India’s solar sector is heavily reliant on imports of solar equipment. Certain countries dumping solar cells and modules to kill the nascent domestic industry, because of which Government had to impose Safeguard Duties. Considering India’s huge solar targets and that electricity is a strategic sector of the economy, India needs to develop domestic solar manufacturing capacities and reduce its dependence on imports to avoid disruption in future, Government has announced to impose 40% Basic Customs Duty (BCD) on Solar Modules and 25% BCD on Solar Cells from 1st April, 2022. The customs duty will replace a 15% safeguard duty currently imposed on imports from China and Malaysia.

·         Further, the Government has announced Production-Linked Incentive (PLI) Scheme for Highly Efficiency Solar PV Modules for Enhancing India’s Manufacturing Capabilities and Enhancing Exports over a five-year period.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Solar Photovoltaic (PV): Rooftop solar capacity addition was at an all-time high at 2.2 GW (up 68% over last year). The increase was predominantly driven by the residential solar segment, which saw 746 MW of new installations. The total project capacity (allocated by the government and public agencies) in the pipeline stood at 67 GW (54 GW of solar and 13 GW wind), with SECI having the highest offtake share of 60% (40 GW), followed by Discoms (22%, 15 GW). Module prices surged by 34% in the first half (the April-September period) due to supply-side constraints in China but eased slightly in the second half. Year-end imported and domestic module prices at $0.26/watt and $0.32/ watt, respectively, were still about 25% up over the previous year. The Company has manufacturing units at Fabcity, SEZ, Hyderabad and Cherlapally, Hyderabad. The manufacturing unit at Cherlapally has installed capacity of 40 MW and the manufacturing unit at Fabcity has installed capacity of 20 MW for manufacture of ‘Solar Photovoltaic Modules”. The Company’s products are sold under the brand ‘Surana Solar’ (formerly ‘Surana Ventures’) in the domestic market. It has systemdriven processes for manufacturing products and operations, following quality process at every stage to ensure delivery of high quality products and services. The Company is manufacturing / assembling the Solar Photovoltaic Modules and installation of rooftop solar for commercial establishments, domestic and industrial units. Wind Power: The Company has wind power with an installed capacity of 1.65 MW in the State of Maharashtra.

BUSINESS OUTLOOK:

Solar power in India at current levels is already cheaper than electricity generated through coal, natural gas or other fossil fuel options. Support from various central and states government for solar power industry is continuously increasing. The Government of India has set an ambitious target of achieving 175 GW of renewable energy capacity by 2022. With this the market players in India now have enough incentive to move to clean sources of energy. In view of the huge demand for solar product, sufficient government support, encouraging polices and Company having considerable market in this line of activity, the company expects to benefits by the same.

Source: Company's Annual Report 2021-22

Product wise Revenue (%):

Source: Company's Annual Report 2021-22 

Financial Snapshot:

Balance Sheet (Rs. in Crores):

Profit and Loss Account (Rs. in Crores):

Cash Flow Statment (Rs. in Crores):

Source: www.sharescart.com 

VALUATIONS:

On the basis of Discount Cash Flow Valuation Method, we

are recommending ‘Buy’ for the stock. Since the stock

offers good opportunity, we initiate a ‘BUY’ signal on the

stock with 12-month price target of Rs 34.39/- share an

upside of 33.00 % from current levels.