43% upside potential? Nuvama maintains 'Buy' on Waaree Energies, Premier Energies & Vikram Solar; sees multi-decadal opportunity

Nuvama Institutional Equities has maintained its constructive stance on India's solar manufacturing space, reiterating 'Buy' ratings on Waaree Energies Ltd, Premier Energies Ltd and Vikram Solar Ltd. The brokerage described the sector as offering a "multi-decadal opportunity", despite near-term margin pressures.

Nuvama forecasts aggregate Q4 EBITDA for module manufacturers to grow 38 per cent year-on-year (YoY), though decline 15 per cent quarter-on-quarter (QoQ), primarily led by higher production volumes.

For Waaree Energies, Nuvama expects EBITDA to rise 62 per cent YoY to Rs 1,500 crore, supported by solar module production of 3.8GW, up 83 per cent YoY. However, EBITDA may fall 22 per cent sequentially due to a 15 per cent QoQ decline in cell output amid switchover to G12/G12R technology, along with a rise in input costs.

The brokerage estimates Waaree's Q4 revenue at Rs 8,000 crore, up 100 per cent YoY and 6 per cent QoQ, while EBITDA margin is likely to decline 445 basis points (bps) YoY and 690 bps QoQ to 19 per cent. Profit after tax (PAT) is estimated at Rs 940 crore, up 51 per cent YoY but down 31 per cent sequentially.

For Premier Energies, Nuvama expects revenue and EBITDA to grow 29 per cent and 13 per cent YoY, respectively, supported by module and cell production of 0.97GW and 0.65GW, up 45 per cent and 43 per cent YoY. EBITDA margin is projected at 29 per cent, down 401 bps YoY and 204 bps QoQ due to higher input costs. The brokerage estimates PAT at Rs 370 crore, reflecting a 34 per cent YoY increase.

Meanwhile, Vikram Solar's revenue is projected at Rs 1,270 crore, up 7 per cent YoY and 15 per cent QoQ, with EBITDA expected at Rs 220 crore, flat YoY but 9 per cent higher sequentially. Production is estimated at 0.87GW, up 9 per cent QoQ, while EBITDA margin may moderate to 18 per cent due to rising input costs. PAT is pegged at Rs 120 crore, up 37 per cent YoY and 19 per cent QoQ.

Nuvama highlighted that expansion into adjacent segments such as battery energy storage systems (BESS), inverters and electrolysers, along with increasing vertical integration, is likely to support long-term growth visibility.

The brokerage has reiterated 'Buy' ratings on Waaree Energies, Premier Energies and Vikram Solar, with target prices of Rs 3,737, Rs 1,082 and Rs 267, respectively. These imply potential upside of 21.28 per cent, 14.69 per cent and 43.36 per cent, in that order, from Monday's closing levels.