Waaree Energies
IPO Size: Rs. 4,321 cr
- Rs. 3,600 cr Fresh Issue, to part-fund Rs. 9,050 cr greenfield capex in Odisha
- Rs. 721 cr is Offer For Sale (OFS) mainly by the promoter (72% to shrink to 64% post IPO)
Price band: Rs. 1,427-1,503 per share
M cap: Rs. 43,179 cr, implying 10% dilution
IPO Date: Mon 21st Oct to Wed 23rd Oct 2024, Listing Mon 28th Oct 2024
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
India’s Largest Solar PV Module Manufacturer
Waaree Energies, with 13.3 GW installed capacity across Gujarat and Noida, is India’s largest solar photo voltaic (PV) modules manufacturer, ahead of Adani Mundra (4 GW), ReNew Power (4 GW), Saatvik (3.8 GW), Vikram (3.5 GW), Renewsys (2.8 GW), Goldi (2.5 GW), Premier (2.4 GW) among others. It manufactures modules using all 3 technologies – multicrystalline, monocrystalline and the efficient TopCon (flexible, Mono PERC and BIPV), with 43% capacity utilisation in FY24. Waaree is India’s largest solar module exporter, with exports accounting for 40% of Q1FY25 topline.
Huge Capacity Increase + Backward Integration
- It is investing Rs. 9,050 cr in an integrated greenfield plant of 6 GW ingot wafer, solar cell and solar PV module each in Odisha, likely to start production by FY27E. Land has been purchased for Rs. 138 cr. Rs. 2,775 cr IPO proceeds, Rs. 5,518 cr debt, Rs. 610 cr internal accruals will fund the project
- In FY25E, a 5.4 GW solar cell plant is expected to be commissioned (1.4 GW in Nov 2024, balance by Mar 2025) at Gujarat plant
- Another 1.6 GW module plant in Texas, US, with an investment of Rs. 500 cr (funded via internal accruals and debt), capable of being expanded to 3 GW by FY26 and 5 GW by FY27
Thus, by FY27E, module manufacturing capacity will rise by 60% to 21 GW and 11 GW cells and 6 GW ingots capacity plan to get added.
Scale drives Margins
FY24 revenue rose 69% YoY to Rs. 11,400 cr, in line with rise in effective installed capacity to 12 GW. FY24 EBITDA rose 92% YoY to Rs. 1,810 cr (16% EBITDA margin) and PAT by 155% YoY to Rs. 1,274 cr, translating to 11% net margin.
Even though Q1FY25 installed capacity rose 31% YoY, revenue was flat at Rs. 3,409 cr, with PAT growth also muted at 19% YoY to Rs. 401 cr, translating into 12% net margin and Rs. 15 EPS, against FY24 EPS of Rs. 48.
Comparison with sole large peer Premier Energies
- Solar module capacity of 13.3 GW is much higher than Premier’s 2.5 GW. But Waaree does not have solar cell manufacturing capacity at present (1.5 GW for Premier).
- Waaree has interest in green hydrogen, through the award of PLI for 300 MW electrolyser, which it plans to locally manufacture by end of FY26E. Premier is not present in hydrogen.
- Waaree operates on fixed asset turnover of nearly 10x, double of Premier. Thus, despite similar fixed assets (and depreciation) but utilization half of Premier, Waaree’s revenue and PAT is double of Premier. While Waaree’s 16% EBITDA margin is lower than Premier’s 22%, PAT margin for both is similar at 12%.
- However, Q1FY25 revenue grew at just 2% YoY, much lower than Premier’s 170%
Attractively Priced
Annualising Q1FY25 EPS of Rs. 15 leads to a current year PE multiple of 25x for Waaree, which is very attractive for its leadership, ongoing growth plans, 30% RoE, as well as in relation to peer Premier’s PE of 58x.
Even though Q1FY25 was muted and company’s management team is relatively new (CFO joined in Sep 2024, CEO in Mar 2024), sector tailwinds and 17 GW current order book overshadow these concerns, for now.
A word on listed subsidiary Waaree Renewable Technologies
Waaree Energies holds 74.4% stake in listed Waaree Renewable Technologies, having m cap of Rs. 17,700 cr. Shareholding pattern indicates that FPIs holding is 0.98% with 25% retail. Ruling at a PE of ~70x, share price of Waaree Renewables price may be under pressure, once ‘fair price’ gets discovered with Waaree Energies’ listing.