Hi. thanks for referencing this thread. I wasnt aware one existed. Given that the captioned corporate development is old news now, I guess we can now change the name of the thread to the company’s name and discuss further.
Yes i am invested here for around a year, so views are (not “may be”) biased.
Company has started coming out with press releases, results presentations and also held 2 concals, most recent one being yesterday (28th) for its Q1-f24 results.
Being involved in solar epc, the company is likely to benefit significantly from industry tailwinds driven by government support to move to renewable energy.
But epc does not get counted as a high quality business, and often scale works to the contractor’s disadvantage.
Unless the company is able to maintain the same financial, business, and operational discipline that it would have maintained when it was smaller.
We have WR (waaree renewables) as a smaller co and we have Sterling Wilson as a company to learn from given its vintage – what are the risks, what can go wrong, how any company can get affected by its decisions, by sector dynamics etc.
While benefitting from industry tailwinds, WR would need to ensure they try not to commit mistakes that plagued SW (from which it seems to be turning around).
During both concalls, and in their press release / presentations comments, the WR management has referenced several times their focus on ensuring profitability, being prudent in selecting and executing orders, endeavoring to ensure control over debt and working capital and achieve positive cashflows. Investors would need to keep track of these as they grow.
Apart from solar epc, there are optionalities of green hydrogen, solar+wind hybrid projects, and (perhaps) pumped storage that the company is exploring / executing.
Operations and Maintenance of solar plants is another attractive line of business with high profitability, low investments and high returns on capital. Compared to epc, which is a bulk business, OnM income is relatively granular and will take time to build up. However the company seems to be focused on this.
Their 3rd line of business is IPP, where they set up solar plants, and operate them by supplying power to the grid. They indicated they might also sell the plant to other investors if the offer is attractive. They also have stated their intention to be prudent in this business as it takes up relatively higher capital than epc.
Coming to financials, being a relatively young operating company, their quarterly financials have been a bit over the place, especially in the profit margins department. While sales growth has been decent, margins have been fluctuating.
From the recent call we can draw inferences of how much revenues they are likely to generate. They have an order book of 850MW to be executed over 9-12 months (some delays may happen). 20-30% of this is with modules (as per their Q4-f23 concal) and can generate Rs. 3.5-4cr per MW and the rest is without supply of modules which can generate Rs. 1.2-1.5cr per MW. They guided for 12-15% ebidta margins (after having indicated the range to be 15-25% in the Q4-f23 call). This I think (my assumption) refers to the epc business. The OnM can possibly contribute an additional 1-2% on overall basis. Currently there is little/no debt. We can assume depreciation, and tax and come to a PAT number (my guess is pat margins would range between 5-6% to 8-9%).
We also need to track order wins. Given the govt relaxation on ALMM rules and the decrease in module prices, epc contract enquiries and order awards/execution is likely to pick up pace. Which augurs well for WR.
These are my broad views. If there are any specific points , we can try to discuss them.
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