Summary of Wari Energies Limited Earnings Call Q2_2025

Industry Outlook

• The solar industry is benefiting from strong tailwinds, driven by the fact that solar energy is the lowest cost energy globally.
• Diversification of supply chains is another important demand driver, with countries like the United States and India pursuing a “China Plus One” strategy.
• India has set a target of 500 GW of renewable energy by 2030, translating to 60-70 GW of solar power annually.
• This target does not even include the potential demand from data centers, EV charging, and the expected hydrogen boom.
• The combination of solar and batteries is expected to be a leading solution for firm and dispatchable renewable energy globally.
• Solar is viewed as a multi-decadal growth story that is just getting started.

Company Performance and Outlook

• Wari Energies Limited reported revenue of ₹34,634.63 million in Q2 FY25, a 2.95% increase year-on-year.
• EBITDA in Q2 FY25 was ₹61,393 million, up 14% year-on-year, with an EBITDA margin of 16.76%.
• For H1 FY25, revenue was ₹71,543 million (up 2.67% year-on-year) and EBITDA was ₹12,539.26 million (up 14.74% year-on-year), resulting in an EBITDA margin of 17.51%.
• The company has a strong order book of 20 GW, with a diversified customer base spanning exports, large customers, commercial and industrial customers, and retail customers.
• The order book mix as of September 2024 was 27.5% domestic and 72.5% overseas.
• Wari Energies Limited is focusing on robust execution skills to deliver on this order book.
• The company is seeing impressive growth in production, with 3.3 GW produced in H1 FY25 compared to 4.8 GW for the entire FY24.

Business Segments

• Exports constituted 27% of the business mix in FY25, down from 60% in FY24. This shift is attributed to cyclical factors rather than structural issues like competition.
• The retail segment is also experiencing strong growth, currently contributing 23% of the overall business. Management believes it has massive growth potential.
• Wari Energies Limited is expanding beyond solar into other energy transition areas like green hydrogen and battery energy storage systems.
  • The company is setting up an electrolyzer manufacturing plant and plans to announce details within the next two months.
  • The board has approved a ₹600 crore investment in renewable power infrastructure to support the broader energy transition strategy.

Margin Guidance

• Management expects overall profitability to improve by 200 to 300 basis points due to backward integration through the new cell manufacturing capacity.
• This guidance is based on a blended approach, and the profit potential could be significantly higher with full integration.
• The company aims to maximize profit potential through strategic configuration of orders from its manufacturing facilities in India and the US.

Key Risks

• Changes in US trade policy, particularly the potential for anti-dumping and countervailing duties, pose a risk to the company’s US operations. Management is monitoring the situation and expects clarity in January.
• Competition from Southeast Asian countries is another potential risk, although it was not a factor in the reduced export mix this year.

Manufacturing Capacity

• Wari Energies Limited currently has 12 GW of module manufacturing capacity in India, distributed across various locations, with Surat being the largest.
• The company has an additional 1.3 GW facility in Goa that began operations in July 2024 and is currently ramping up.
• A 1.6 GW module manufacturing facility in Texas, USA, is nearing completion and is expected to begin commercial operations by the end of January 2025.
• A 5.4 GW cell manufacturing facility in Surat is also under construction and is expected to commence commercial operations in mid-December 2024.
• A 6 GW integrated facility in Odisha is in advanced planning stages, with land secured and design contracts awarded. This facility is expected to be operational in FY27.
• The company is also evaluating additional capacity expansion in the US, potentially adding 3.4 GW of module capacity and 5 GW of cell capacity.
• By the end of FY25, Wari Energies Limited expects to have a total manufacturing capacity of 15 GW (13.3 GW in India and 1.6 GW in the US).
• By FY27, the company projects 21 GW of module capacity and 11 GW of cell capacity in India, plus potential additions in the US.

Key Takeaways

• Wari Energies Limited is well-positioned to capitalize on the multi-decadal growth in the solar industry.
• The company’s strong order book, robust manufacturing footprint, and expansion into new energy transition areas point to a bright future.
• Management’s focus on execution, profitability, and customer satisfaction will be key to its continued success.
• Changes in US trade policy and competition from Southeast Asian countries are potential risks that need to be monitored closely.

Disc: Invested