Kotak initiates coverage on Waaree Energies with a sell rating, target price at Rs 2,550 a share

Kotak Institutional Equities has initiated coverage on Waaree Energies Ltd with a sell rating and kept a target price of Rs 2550 a share, down 7 percent from its current market price due to elevated valuations.

Kotak’s price target for Waaree Energies reflects a strong growth outlook, with expectations of a 12% CAGR in module capacity, reaching 40 GW/32 GW by 2035. This growth is supported by a 14% volume CAGR in module sales, driven by capacity expansion and 70%+ utilisation rates. Waaree’s EBITDA margins are projected to stabilise at 19.4% by FY2035, with a cost of equity at 13% and WACC at 12.6%. The terminal value is pegged at 2x the FY2035E book value, in line with Chinese peers.

As India’s largest solar module manufacturer, Waaree is poised to maintain its market dominance, with plans to expand its capacity to 19.3 GW for modules, 11.4 GW for cells, and 6 GW for wafers by 2027. The company’s vertical integration is expected to boost EBITDA margins from 13.8% in FY2024 to 23.6% by FY2027. In the US, Waaree plans to scale its capacity from 1.6 GW in FY2025 to 5 GW by FY2027, aligning with local demand. The company’s future growth will also be driven by its EPC subsidiary WRTL and new ventures in electrolysers and BESS systems, Kotak said.

Kotak forecasts a 35% PAT CAGR for Waaree over FY2024-30E, supported by domestic capacity expansion, US cell manufacturing, and higher capacity utilisation. Margins are expected to improve due to vertical integration, although increased competition may put pressure on margins from FY2028. Waaree is expected to fund growth through operating cash flows and IPO proceeds.