Nuvama initiates coverage on this beaten down multibagger stock; sees up to 32% upside

Nuvama has initiated coverage on Premier Energies, a corrected solar sector counter, as the brokerage forecasts its FY26E–28E revenue/EBITDA will grow at 49%/43% CAGR, driven by a surge in module, cell, and new wafer capacity. Its strong cash flow of Rs 8,200 crore over FY26E–28E supports prudent capital allocation and reinforces balance sheet strength.

Backward integration to wafers, along with government support through ALMM and DCR mandates, should cushion margin decline as competition intensifies. Weak demand for recent IPO fund-raises is expected to limit future competitors' access to funding, reducing overcapacity risks, says Nuvama.

Premier Energies (Premier) is tactically pivoting to capitalise on the J-curve-like exponential growth in New Energy even as core solar remains stable. Its rising capacity, backward integration and steady DCR-linked realisation underpin Nuvama Institutional Equities' FY26–28E revenue/EBITDA CAGR of 49%/43%.

"We argue overcapacity concerns in the sector are overblown given an increasingly difficult environment to raise critical funding. Margins shall moderate over medium term, but comprehensive integration—to wafers, BESS, transformers, inverters—shall help sustain growth and de-risk. Meanwhile, early-stage high-growth industry life cycle calls for even higher valuation," said Nuvama.

Shares of Premier Energies settled at Rs 964.95 on Tuesday, while the stock jumped over 2.35% to Rs 982.60 on Wednesday, with a total market capitalization of more than 44,000 crore. However, the stock has tumbled more than 30% from its all-time high at Rs 1,387.10 hit in December 2024. It hit its 52-week low at Rs 755.55 on April 7, 2025.

Listed in September 2024, shares of Premier Energies have surged more than 115% so far from its issue price of Rs 450 apiece. The stock had delivered multibagger returns of more than 200 per cent as of its 52-week high compared to its IPO price. The company had raised a total of Rs 2,830.40 crore via IPO.

Premier is executing a long-term strategy to become a horizontally and vertically integrated New Energy (NE) play. Its module EBITDA contribution is projected to fall from 62% in FY25 to 36% by FY30E, as wafer and cell EBITDA contribution rises from 38% to 46%. BESS EBITDA contribution is expected to reach 13% by FY30E from nil currently, providing an earnings boost, the brokerage firm notes.

Expansion into transformers and inverters offers additional growth and sustainable margins. Nuvama sees India’s solar sector on the cusp of a significant J-curve breakout, opening up further BESS, data centre, green hydrogen (G H2), and green ammonia (G NH3) opportunities for Premier.

Much like the IT sector’s valuation trend during Y2K, Premier’s high 24 times FY25 EV/EBITDA reflects explosive growth and anticipated earnings catch-up. Based on a projected 43% EBITDA CAGR, strong cash flow, a robust balance sheet, and RoE of over 30%, Nuvama expects FY28E EV/EBITDA to be a reasonable 10 times.

"Inevitably, new industries entail imponderable risks—eventual import tariff cuts, technological upgrades, and potential module overcapacity. We attempt to factor these in and provide a valuation sensitivity at different growth rates with a base case of a modest nominal free cash flow CAGR of 16% over FY25–45E. Initiating with a Braveheart 'buy' with a target price of Rs 1,270," Nuvama added.