Waaree Energies IPO GMP indicates 85% listing gains: Should you apply? Here's what analysts say

Waaree Energies IPO GMP indicates 85% listing gains

Waaree Energies initial public offer (IPO), aimed at raising up to Rs 4,321 crore, is all set to hit the primary market on October 21 and the current grey market premium trends indicate the market's positive outlook on the company's potential growth and value appreciation as investors are willing to pay a significant premium over the IPO's issue price to secure a stake.

According to latest GMP trends tracked by multiple platforms, the shares of Waaree Energies are commanding a grey market premium of 85 percent in the unofficial market.  However, GMP trends are not reflective of actual market performance, and the official listing price remains to be seen.

The investors' interest is seen after the largest-ever IPO by Hyundai Motor India witnessed subdued demand, impacted by market volatility and a weakened outlook for the auto sector.

The company has a substantial order book of solar PV modules, including 16.66 GW for domestic and export orders, franchisee orders, and 3.75 GW of orders for its subsidiary, Waaree Solar Americas Inc., located in the United States. It's strong leadership position allows it to offer competitive pricing for its products, making them accessible to a large and diverse customer base. Waaree Energies has built relationships with a wide range of customers globally and in India.

However, analysts at SBI Securities highlighted the export risk for the company as it generated nearly 58 percent of its revenue from export sales in FY24, with the USA standing out as the key export market. "Any slowdown in demand from this key market will lead to an adverse impact on the business. Additionally, any fluctuations in exchange rates can also affect the profitability of the company," it said in its latest research note.

The company imports a significant portion of its raw material requirements, particularly solar cells from China and other South East Asia jurisdictions.

However, the company's chief executive officer Amit Paithankar told Moneycontrol that Waaree is looking at reducing its import dependency through backward integration measures. The move comes as Indian companies are stepping in to bridge the gap created by the exclusion of Chinese exports from the rapidly expanding US solar industry.

The research report said: "In 2022, the government imposed a higher rate of customs duty (25%) on imported solar cells which impacted the company’s cost of materials. Going forward, any restrictions on import from China and other countries, along with hikes in import duties may significantly affect the margins of the business."

It added, "Waaree Energies recorded a CAGR of 99.8%/276.7%/300.0% in Revenue/EBITDA/PAT respectively during FY22-FY24 period, showcasing the company’s robust financial performance."

At the upper price band of Rs 1,503, Waaree Energies is valued at FY24 P/E multiple of 33.9x based on its post issue capital. The company is largest manufacturer of solar PV modules in India, with an aggregate installed capacity of 13.3 GW.

Going forward, the company will set up a 5.4 GW solar cell manufacturing plant (likely to commence production by FY25), a 6 GW fully-integrated manufacturing facility (likely to commence production by FY27) and a 1.6 GW plant in USA (further scalable up to 5 GW by FY27) to capitalize on the strong industry growth.

Monarch Networth Capital has given 'Subscribe' rating to the offer saying the company is best placed to capitalize on the growing opportunity given its leading market share, strong financials, and continued focus on innovation and sustainability.

"WEL stands at the cusp of a gigantic opportunity given its market leadership and commitment to innovation and sustainability," the analysts said.

KR Choksey has also come out with its report on Waaree Energies Ltd. The research firm has recommended investors to "Subscribe" the issue.

"At a P/E ratio of 33.9x, Waaree offers an attractive investment opportunity in India’s booming renewable energy market. Based on these factors, we recommend a “Subscribe” rating for the upcoming IPO," it said.

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