Waaree Renewable shines among all green Stocks with an Upside of 558% in 1 year…

Summary

Investors are buzzing about Waaree Renewable Technologies: trading at a fraction of its potential, boasting robust revenue growth projections, and a PE ratio that suggests it’s still flying under the radar!
Waaree Renewable Technologies is positioned as a leading player in the renewable energy sector, primarily focusing on solar energy solutions

Investment theme :

Waaree Renewable Technologies is positioned as a leading player in the renewable energy sector, primarily focusing on solar energy solutions. Waaree specializes in providing a comprehensive range of solar energy solutions, including floating solar systems, rooftop solar installations, and ground-mounted solar project engineering, procurement, and construction (EPC) services. This diversified approach allows the company to cater to various market needs and capitalize on the growing demand for renewable energy.

It’s not every day you find a company like Waaree Renewable Technologies that:

☑️ has reported a staggering 149.73% revenue growth YoY, reaching ₹876.44 crore in FY 2023-24

☑️ boasts an impressive unexecuted order book of 2,365 MWp, set to be executed in the next 18 months

☑️ is recognized as the largest solar PV module manufacturer in India with an installed capacity of 12 GW! 

Key Positives :

• Engaging proactively in government and private sector bidding processes to expand their project portfolio and strengthen their market presence.
• They are actively assessing opportunities in both the international and domestic markets to secure new EPC contracts, capitalizing on robust expertise in renewable energy solutions.
• It has India's largest Solar panel manufacturing capacity of 12GW at its plants in Chikhli, Surat and Umbergaon in Gujarat.

Let's look into What is Driving This Optimism?

• Waaree Renewable Technologies Limited, established as a subsidiary of Waaree Energies Limited, has emerged as a leader in the solar energy sector since its inception. With a strong commitment to sustainability and innovation, Waaree has successfully completed over 10,000 solar projects, contributing to more than 600 MW of operational capacity.

• The major contribution to Waaree Renewable Technologies' revenue comes from its EPC (Engineering, Procurement, and Construction) segment.
  

• The company provides a comprehensive range of services, including solar EPC solutions, rooftop installations, and floating solar projects. Their turnkey solutions ensure efficiency from project conception to execution.

• Waaree has executed significant projects, including a 49.5 MW power plant in Vietnam, showcasing its ability to deliver on international contracts efficiently.

• The company is exploring opportunities in green hydrogen, setting up a 1 MW green hydrogen plant, and evaluating collaborations to establish an electrolyser gigafactory in India.

• Waaree Energies, the parent company, is gearing up for an IPO expected to launch in mid-October, aiming to raise substantial funds for expansion projects . 

In FY 2023-24, Waaree reported a remarkable revenue increase of 149.57% YoY, reaching INR 876.44 crore. The profit after tax also surged by 167.55%, highlighting the company's robust operational performance.

 Assumptions for Earnings Forecast :

•  Revenue Growth forecasted at 184.25% for FY25 and 75% for FY26 based on Forecasted revenue growth.

• The company plans to execute projects between 1.8 to 2 GW in FY25, which can result in a doubling of revenues over Rs. 2,500 to 2,800 Cr ( Management Guidance )

• Operating Profit Margin forcasted at 24% based on Average OPM of the last 2-3 years 

• Tax Rate remains constant at 35% based on last 3 years average Tax rate cut.

• Forward PE adjusted according to the forcasted EPS growing at CAGR of 80% approx Other Expenses/Incomes assumed based on historical Data, expenses including depreciation and interest expense at around 6Cr and 9Cr.

Management’s Guidance :

1. Growth and Expansion: WRTL has successfully executed a substantial order book, including a notable 980 MW solar project in South India. The company plans to execute projects between 1.8 to 2 GW in FY25, which can result in a doubling of revenues over Rs. 2,500 to 2,800 Cr

2. Technological Innovation: The company emphasizes the adoption of advanced technologies to improve plant reliability and operational efficiency. This includes leveraging tech-based data analytics for monitoring and predictive maintenance, which enhances overall plant performance and reduces downtime

3. Market Positioning: As a Tier 1 solar module manufacturer, WRTL has established a robust global footprint, supplying over 12 GW of solar modules across more than 68 countries. The company has 1,400+ authorized sale points & franchises in India. It has commissioned projects across 13 states in India. This positioning not only strengthens its market presence but also aligns with India's ambitious renewable energy targets of achieving 500 GW by 2030

4.Sustainability Initiatives: WRTL is committed to sustainable energy solutions that reduce carbon footprints. The company aims to continuously improve product quality and service delivery while fostering innovation in its offerings

Order Book – A Strong Indicator of Future Performance

One of the most significant indicators of its future performance is its robust order book, which reflects the company's ability to secure contracts and execute projects effectively. As of March 2024, Waaree's order book stood at approximately 2,365 MW, valued at around INR 3,200 crore (approximately $390 million)

Current Order Book Overview

The executed portion of Waaree's order book includes 704 MWp of successfully completed projects, showcasing the company's operational efficiency and reliability in delivering on its commitments.

The unexecuted portion indicates a pipeline of projects that are set to be completed within the next 18 months, further enhancing Waaree's revenue prospects.

Key Projects in the Order Book

Waaree's order book comprises a variety of significant projects, including:

• Ground-Mounted Solar Power Projects: These projects include capacities of 980 MWp, 450 MWp, and 412 MWp, which are pivotal in meeting India's growing energy demands.

• Rooftop Solar Projects: Smaller-scale projects like a 4 MWp rooftop installation also feature prominently in their portfolio, reflecting Waaree's versatility in project execution.

• Floating Solar Projects : Our floating solar solution uses water bodies like lakes and ponds for solar panel installation, converting otherwise unused water surfaces into productive renewable energy sources.

Annual Report - https://waareertl.com/floating-solar

Growth Projections

The company plans to execute projects between 1.8 to 2 GW in FY25, which can result in a doubling of revenues over Rs. 2,500 to 2,800 Cr. This ambitious target is supported by an additional 13 GW capacity in its bidding pipeline, indicating a healthy influx of potential contracts driven by increasing government focus on renewable energy sources.

Strategic Importance of the Order Book

1. Revenue Stability: A strong order book provides Waaree with a stable revenue stream. With ongoing projects and new contracts lined up, the company is well-positioned to maintain consistent cash flow.

2. Market Confidence: The ability to secure large-scale contracts enhances stakeholder confidence, reinforcing Waaree's reputation as a reliable partner in the renewable energy sector.

3. Diversification Opportunities: The company is also exploring opportunities beyond traditional solar projects, including ventures into green hydrogen and energy storage systems. This diversification can further solidify its market position and revenue sources.

4. Government Support: With increased investments from public sector units (PSUs) and government initiatives aimed at boosting renewable energy infrastructure, Waaree stands to benefit significantly from favorable policy environments 

High PE Projections :

The orange line reflects Waaree Renewables Technology's upward trend in market price over the years, signaling increasing investor optimism in the company's growth trajectory and future earnings potential within the renewable energy space.

• Moderate Valuations at 65x and 75x: Should the company's growth remain steady but not exceed high expectations, valuations around the 65x to 75x P/E range could be more practical. This range still indicates a positive outlook but with a more conservative approach to future performance.

• Upside Potential at 85x and 95x: If Waaree continues to outperform, bolstered by factors like increasing market share, enhanced profitability, and favorable macroeconomic trends, reaching the 75x to 85x

• valuation bands would be feasible. This would suggest a significantly higher stock price and strong investor confidence in the company's long-term potential.

Waaree is in the spotlight for a reason. And here’s the quick look why -

Robust Order Book

Waaree boasts a substantial order book valued at INR 3,200 crore (approximately $390 million) with a capacity of 2.3 GW from its EPC contracts. This strong position indicates a solid foundation for future revenue growth and project execution.

Projected Revenue for FY25:

  For 2000 MW execution in FY25 : Projected Revenue = 2000 MW x 12.45 million

                                                                                              = ₹24.9 billion 

Growth Rate Calculation for FY26:

Assuming continued growth and based on historical trends (150% YoY in FY24), we can apply a conservative growth rate of around 50% to 100% for FY26.

 If we take a midpoint growth rate of 75%, projected revenue for FY26 would be:

                                                   Projected Revenue for FY26 = ₹24.9 billion× 1.75

                                                                                                    = ₹43.5 billion

The projected revenues for Waaree Renewables Technology are as follows:

• FY25 Projected Revenue: Approximately ₹2,490 crores (from ₹24.9 billion).

• FY26 Projected Revenue: Approximately ₹4,350 crores (from ₹43.5 billion).

Based on a comprehensive analysis of Waaree Renewable Technologies' robust financial performance, substantial order book, and strategic initiatives in renewable energy, I am forecasting a future price target of ₹4,122 per share. 

This estimation reflects the company's impressive revenue growth, expanding project pipeline, and commitment to sustainability, positioning it favorably within the rapidly evolving renewable energy sector. 

Disclaimer: This forecast is based on my personal assumptions and opinions regarding Waaree Renewable Technologies' performance and market conditions. Investors should conduct their own research and consider their financial situation before making investment decisions. Past performance is not indicative of future results, and stock prices can be volatile.