Waaree Energies IPO analysis

Waaree Energies IPO will open for subscription on October 21, 2024 and close on October 23, 2024. We break down the solar panel manufacturer's strengths, weaknesses, and growth prospects to help investors make an informed decision. Waaree Energies IPO in a nutshell Quality : Its three-year average ROE and ROCE were nearly 34 and 30 per cent, respectively, during FY22-24. Growth : Its revenue and net profit grew nearly 100 and 300 per cent per annum, respectively, during FY22-24. Valuation : Post the IPO, the stock will be valued at a P/E and P/B ratio of around 32 and 5 times, respectively. Overview: According to the National Institute of Solar Energy, India's current solar power generation capacity is 89 GW (gigawatt), with the potential to reach 750 GW. India aims to expand its solar module manufacturing capacity to 70 GW by 2030. As the country's largest PV module manufacturer, Waaree Energies stands to benefit from this growth. However, intensifying competition from organised players may challenge its market position. About Waaree Energies Waaree Energies is India's largest solar PV module manufacturer, with an installed capacity of 12 GW as of June 30, 2024. The company operates five manufacturing facilities across India, spanning around 143 acres, with an average capacity utilisation of 45 per cent in FY24. It occupies over 21 per cent of India's photovoltaic module market share based on total enlisted capacity. Waaree's current order book of solar PV modules stands at 16.6 GW, including domestic, export, and franchisee orders, plus 3.75 GW for their US subsidiary. Strengths of Waaree Energies Backward integration : Waaree is enhancing its capabilities by commencing in-house solar cell production at its Chikhli facility, which is expected to be operational by FY25. It is also setting up a fully integrated 6 GW facility for ingots, wafers, solar cells, and solar PV modules, which is expected to be operational by FY27. Robust financials : As the largest player in solar PV manufacturing, Waaree boasts impressive EBIT (earnings before interest and taxes) margins of 8 per cent. This success is partly attributed to their focus on exports, which increased from 23 per cent of revenue in FY22 to around 58 per cent in FY24. Weaknesses of Waaree Energies Pricing pressure: Chinese oversupply of solar components including PV modules and cells is forcing domestic manufacturers, including Waaree to sharply lower prices. The solar module prices dropped 25 per cent in FY24. The trend is expected to sustain, threatening the company's profitability. Dependence on government policies : Waaree Energies heavily relies on government policies and incentives, which keep changing. This creates uncertainty in production planning and can hinder scaling efficiency. Import dependency: A significant portion of Waaree's materials, particularly solar cells, are imported from China. The cost of imported materials accounted for 98 per cent of the company's total purchase cost, of which 54 per cent was from China alone. Such heavy reliance exposes the company to risks from trade restrictions or geopolitical tensions. Waaree Energies IPO details Total IPO size (Rs cr) 4,321 Offer for sale (Rs cr) 721 Fresh issue (Rs cr) 3,600 Price band (Rs) 1,427 -1,503 Subscription dates October 21-23, 2024 Purpose of issue Offer for sale, financing cost for Odisha facility Post-IPO M-cap (Rs cr) 43,178.7 Net worth (Rs cr) 8,072.0