The half-year ended (H1FY25) earnings of lately listed Waaree Energies Ltd, the most important photo voltaic module producer in India, got here as a impolite shock to traders. The inventory fell 10.5% since outcomes had been introduced on 18 November.
Its maiden outcome, publish itemizing, confirmed that in H1FY25, consolidated income grew a mere 2% year-on-year to ₹6,983 crore, damage by decrease export volumes. Within the earnings name, the administration stated export realization fell from 28-30 cents per watt-peak (Wp) a yr in the past to 24 cents in H1FY25, whereas the identical within the home market fell from 21 cents to 17 cents. Contemplating that value realization fell by about 20% and gross sales nonetheless grew 2% year-on-year on this span, gross sales quantity development should have been about 22%.
Within the case of Waaree, gross sales in worth phrases might not be a important metric as a result of the promoting value of photo voltaic modules or completed items fluctuates in tandem with the procurement value of photo voltaic cells, a key uncooked materials. Subsequently, gross sales quantity and gross margin are higher indicators of earnings efficiency.
Gross margin noticed a pointy year-on-year enchancment of 390 foundation factors to 25.3% as uncooked materials value or the price of photo voltaic cells eased. Nevertheless, gross margin good points acquired considerably diluted at Ebitda stage as Ebitda margin growth was restricted to 110 bps to fifteen.4%, adversely impacted by the rise in workers prices and promoting overheads. The administration anticipates a bump-up of about 200-300 bps in Ebitda margin as soon as their backward integration plan of photo voltaic cell manufacturing fructifies. Their 5.4 GW photo voltaic cell manufacturing unit is more likely to be absolutely operational by the tip of FY25.
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The orderbook stood at 20 GW on the finish of H1FY25 with recent order influx of 5GW. The corporate already has a powerful abroad order e-book, primarily from the US, that stood at 72% and the remainder coming from the home market. It additionally plans to arrange 1.6GW of photo voltaic module manufacturing within the US by FY25. Regardless of the change within the US authorities with Donald Trump coming to energy, the administration is assured of enterprise prospects.
The corporate believes that even when the tariff on Chinese language imports is raised, it is not going to have an effect because the photo voltaic cell requirement for US operations will both be met from the US or from India. Additionally, since Waaree has collected advances from prospects on the time of order placement, possibilities of order cancellation are low even after the switch of energy within the US authorities.
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Subsiding euphoria
True, traders who acquired allotments noticed mouth-watering itemizing good points. Waaree Energies shares listed on the NSE on 28 October, hitting an intraday excessive of ₹2,624, a premium of 75% to the difficulty value of ₹1,503. However from its 52-week excessive of ₹3,743 on 6 November, the inventory is down round 21% because the listing-led euphoria has began to subside.
Waaree has formidable plans of accelerating present photo voltaic module capability from 13.3 GW to 21 GW by FY27, together with a backward integration plan of 11 GW of photo voltaic cell manufacturing. However, the present market capitalization of ₹80,000 crore for annualized revenue of ₹1,600 crore for FY25 interprets into P/E of 50x.
The valuation a number of seems to be stretched a minimum of in the meanwhile particularly in view of the quickly evolving menace from technological obsolescence. The administration is conscious of this and, due to this fact, follows an aggressive depreciation and amortization coverage to jot down off gear and different prices over simply three years.
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