Disclosure: I am not a financial advisor. This is for informational purposes only. Please do your own research before making any investment decisions.
I am invested in the stock with 200 shares at ~1517 each.
Solex Energy (SOLEX) is an Indian company engaged in manufacturing solar photovoltaic modules and turnkey solar solutions. They currently have a manufacturing capacity of 700MW in Gujarat and are planning a significant expansion.
Growth Drivers:
- Massive Capacity Expansion: Solex is set to add a whopping 800MW capacity by September 2024(Solex Energy buys 800 MW module production line from Wuxi, GMEE Solar – pv magazine India), more than doubling their current production. They further plan to reach 4.5GW by FY26, indicating an aggressive growth strategy.
- Government Push for Renewables: The Indian government plans to add around 40GW solar every year for the next 5 years, and in addition to this there is the PM-SURYA yojna as well.
- Increasing Adoption of Solar Power: Solar energy costs continue to decline, making it an increasingly attractive option corporates as well
Positives:
- Attractive Valuation: With a market cap of only 1200 crore despite significant expansion plans, Solex could be undervalued (assuming they execute their plans effectively).
- Import Curbs: Recent import curbs by the Indian government (After modules, govt now considering non-tariff barrier for solar cell imports | Today News) and the US government on solar panels from China could benefit domestic manufacturers like Solex by reducing competition, and opens US market for export.
Negatives:
- Execution Risk: Successfully implementing such a large capacity increase is crucial for their growth plans.
- Competition: The solar panel market is competitive in India itself, with established players and new entrants vying for market share.
Immediate Triggers:
- Strong FY Sales: By the end of this fiscal year, strong sales figures could lead to a re-rating of the stock price.
Risks:
- Commodity Price Fluctuations: Solar panel production relies on materials like silicon, whose price fluctuations can impact profitability.
- Trade Policies: Government trade policies can affect import costs of raw materials or finished panels.
- Chinese Threat: The dominance of Chinese manufacturers in the solar panel market can never be ignored.
- Increased Competition: A strong ramp up in capacity by many other players can also intensify competition in the market.
Summary:
The stock is a buy given it’s low valuation of just 1200cr, which seems undervalues given it’s plans to reach 4.5GW of capacity, provided Chinese import curbs stay in place in India and in US till FY27 at least.
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