Nuvama Research has maintained a 'buy' rating on Sterling and Wilson Renewable Energy Ltd and increased its target price to Rs 850 a share, up 37 percent from current market price.
The firm's March-quarter revenue doubled compared to last year to Rs 1,178 crore, while the company reported a positive EBITDA of Rs 29.4 crore QoQ, led by rising execution of current high-margin order book, compared to an EBITDA loss of Rs 16.1 crore in the year-ago quarter.
EPC revenue soared 28x YoY/2x QoQ to Rs 1,100 crore at a healthy gross margin of 11.5 percent (negative YoY/11.2 percent QoQ). O&M revenue grew 10 percent YoY to Rs 50 crore (-6 percent QoQ). The company has guided for 10–11 percent overall gross margins, going ahead.
The firm received Rs 500 crore worth of new orders in Q4FY24 across two projects. Secured Rs1100 crore in international orders over three years. Order book stands at Rs 8,000 crore, with 81 percent from high-margin domestic projects. Anticipating a bid pipeline of 30GW (Rs 40,000–50,000 crore) for FY25, predominantly domestic.
Management targets Rs 8,000 crore of new orders in FY25, excluding RIL and Nigeria. Revenue guidance for FY25 is Rs 80–90 billion with a potential 11 percent gross margin which Nuvama expects very much achievable. Nuvama reckon PAT shall turn around even at 50 percent execution of the current order book in FY25. Expecting imminent closure of the $2-billion Nigeria agreement, it said.
Another highlight for the quarter was the reduction in net debt, with the total figure now reduced to Rs 116 crore, compared to Rs 1,966 crore at the end of financial year 2023. Reliance New Energy Ltd owns a 32.54 percent stake in Sterling and Wilson, based on the company's shareholding pattern disclosed to the exchanges as of March 31, 2024.
"We forecast a V-shaped earnings recovery from FY25, accelerating to a hockey stick curve on strong global outlook (Hockey stick curve). Given the lumpy nature of the upcoming Nigeria and RIL orders, we strip them out of core earnings and value them separately at 8x EV/EBITDA. In all, we are hiking long-term gross margins by 50bp to 10.5 percent on anticipated domestic orders," Nuvama report added.
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