Waaree Energies: Silver price rally among key concerns, but MOFSL sees 33% upside

Motilal Oswal Financial Services (MOFSL) reiterated its 'Buy' rating on Waaree Energies Ltd after a strong December quarter performance, even as it flagged high silver prices as a key investor concern. The brokerage said the company delivered results well ahead of expectations and remained on track to exceed its FY26 Ebitda guidance, while valuation continued to appear attractive with a target price of Rs 3,514, implying around 33 per cent upside.

MOFSL said downside risks to margins looked limited, as the rising share of DCR modules in overall sales was supporting better realisations, aided by a sharp quarter on quarter increase in cell production. While volatility in silver prices remained a concern, MOFSL noted that silver accounted for less than 9 per cent of total module costs. It said the impact was being mitigated through pre tied contracts, higher utilisation levels and improved cost absorption.

Besides, it said the removal of China’s export rebates had pushed Chinese cell prices from around 4 cents per watt peak to about 6 cents per watt peak, narrowing the cost gap and improving the global competitiveness of Indian manufacturers such as Waaree Energies.

MOFSL said Waaree reported revenue of Rs 7,570 crore, which was 16 per cent ahead of its estimates, while Ebitda beat expectations by 26 per cent, driven by a higher than anticipated Ebitda margin of 25 per cent. It attributed the margin outperformance to improved operational efficiency and a favourable product mix. Module and cell production rose 34 per cent and 35 per cent QoQ, respectively.

MOFLS said Waaree Energies remains on track to exceed its FY26 Ebitda guidance of Rs 5,500-6,000 crore, adding that the outlook for margins appeared stable.

MOFSL said its estimates built in a margin of safety, factoring in a gradual moderation in Ebitda margins from 23.5 per cent in FY26 to 20.5 per cent by FY28. At 9.5 times FY28 enterprise value to Ebitda, the stock continued to trade at an attractive valuation, it said.

The brokerage valued the domestic module business at 13 times FY28 estimated Ebitda, the US module business at 12 times FY28 estimated Ebitda, in line with global peers, and the new business segment at 10 times FY28 estimated Ebitda. The sum of these segment valuations, adjusted for net debt, translated into a target price of Rs 3,514 per share.

The brokerage said key concerns for investors included volatility in silver prices, a slowdown in tendering activity for pure play solar and hybrid or FDRE projects in FY26 year to date, and the relatively lower domestic share of around 35 per cent in Waaree’s order book.