This stock has surged 630% in one year but analysts still have a bullish outlook  

The upcoming IPO of Waaree Energies, the parent company, is seen as a pivotal moment for the group. Waaree Energies filed a draft red herring prospectus in January and is expected to launch its Rs 3,000 crore IPO by mid-October.

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The stock of Waaree Renewable Technologies has surged over 630 percent in the last one year and more than 300 percent if the current year gains are taken into account and still analysts have a bullish outlook on it.

The stock has been grabbing headlines in the recent past for its stupendous surge but, more importantly, analysts are still bullish on the stock and say factors like strong order book, robust financials, and better operating margins are attracting investors to the counter even amidst concerns of high PE multiples.

Incidentally, its parent company Waaree Energies is also in the process of going public and has already filed its draft document for an initial public offer (IPO).

What does the company do?

Waaree Renewable, previously known as Sangam Renewables, operates in the solar EPC segment and has benefited significantly from the government's push towards renewable energy, particularly solar.

In recent times, the company secured substantial orders, helping its order book surpass 2.1 GW.

“This strong order pipeline highlights Waaree's ability to win large-scale projects, ensuring future revenue growth,” said Divyam Mour, Research Analyst at SAMCO Securities. He further added that Waaree is positioned to gain from India's aggressive solar capacity targets, with the government’s renewable energy policies favouring players like Waaree.

Strong financials

The company reported a net profit of Rs 28.16 crore in Q1FY25, registering a 208.51 percent jump from Rs 9.13 crore in Q1FY24. Revenue for Q1FY25 was Rs 236.35 crore, reflecting an 83.31 percent year-on-year growth compared to Rs 128.94 crore in Q1FY24. EBITDA for Q1FY25 reached Rs 41.08 crore, a 206.60 percent rise from Rs 13.40 crore in Q1FY24.

“Waaree achieved remarkable growth in both revenue and profitability in FY23 and FY24,” said Nirav Karkera, Head of Research at Fisdom, highlighting the company’s nearly 500 percent PAT growth in FY23 and an additional 165 percent rise in FY24.

Karkera attributed this performance to Waaree’s efficient operations and solid balance sheet, which have bolstered investor confidence while highlighting the company’s foray into green hydrogen as a transformative move.

“This venture significantly enhances Waaree’s growth prospects, positioning it as a leader in the renewable energy sector with an innovative and future-focused approach,” he said.

In terms of stock performance, Waaree has been regularly hitting the upper circuit, demonstrating strong short-term momentum.

Analysts, however, have raised concerns about its high P/E ratio of 101.2, which could indicate a potential overvaluation. “The stock may be overvalued in the short term and price corrections could occur,” said Karkera.

The company’s higher operating margins, ranging between 18 to 20 percent -- compared to competitors’ margins of 9 to 12 percent -- provide a competitive advantage. Waaree’s robust order book, standing at 2,191 MW, is expected to be executed within the next 12 months, further demonstrating its strong execution capabilities.

Also read: Waaree Energies IPO likely to be launched in mid-October: All you need to know

“Over the long term, Waaree's consistent growth in revenue, which stands at 149.6 percent YoY, and net profit growth of 167.3 percent YoY, demonstrates its ability to capitalise on the expanding renewable energy market,” said Karkera.

Limited coverage; no mutual fund presence

Despite the strong fundamentals, Waaree is yet to attract significant attention from mutual funds or foreign institutional investors (FIIs).

Mutual funds and FIIs do not hold the stock, possibly due to a shift in focus toward larger funds, said analysts while highlighting that Waaree is still a smaller player compared to giants like Adani Green and NTPC.

Promoters, led by Waaree Energy, hold 74.5 percent of the company’s shares, while FIIs hold 0.8 percent and the public holds around 24.7 percent.

IPO boost

The upcoming IPO of Waaree Energies, the parent company, is seen as a pivotal moment for the group. Waaree Energies filed a draft red herring prospectus in January and is expected to launch its Rs 3,000 crore IPO by mid-October.

The offering includes a fresh issue of shares worth Rs 3,000 crore and an offer for sale of up to 32 lakh equity shares.

“Waaree Energy's upcoming IPO is anticipated to have a positive ripple effect across the Waaree Group stocks, particularly benefiting Waaree Renewable Technologies," said Mour, adding that Waaree Renewable uses solar modules manufactured by Waaree Energies in its operations.

He added that historical trends suggest that listed group companies, like Bajaj Finance and Inox Wind, tend to experience stock price gains during the IPO period and post-listing.

“Waaree group companies are anticipated to experience price gains during Waaree Energy’s IPO, with potential for further growth post-listing, thereby increasing investor interest in the group,” said Mour.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.