Gensol Engineering – A play on Energy Transition (Solar Energy & EV)

My notes from Q1 FY 2024-25 earnings call

1. Gensol had a good Q1. Year over year for Q1 the topline grew from 145 crores to 297 crores, Ebitda 37 crores to 89 crores and PAT 10 crores to 15 crores. The Ebitda margin was 30% for this quarter.
2. The leasing business is seeing good momentum – it grew from 25 crores to 50 crores yoy, and even on sequential qoq basis there was 10% plus growth. However, it reported 6 crores of loss because a lot of capital is being invested for scale. I would not be surprised if Leasing will do 250 crores plus of topline fro this financial year and by Q4 it will stop reporting any losses. However, this is purely my thinking and management did not make any such type of comment in the call.
3. EV business is frankly getting delayed beyond comfort levels. Now they are planning to launch only in Q1-2026. In the first year roughly 7000 vehicles and then scale to 10000-12000 in the next year. 12000 is the break even for this business. Their target is B2B and so there would not be any distributors at least to start with.
4. EPC Solar Panel business is doing great and BESS is also off to a good start. For BESS they will get 260 crores every year for the next 12 years from the existing contract.
5. Management reassured multiple times that they will easily meet the 2000 crores topline target for the current financial year. 15% Q1, 20% Q2, 30% Q3 and 35% Q4 is norm. They also said that EBITDA would be 400 crores plus for the year.
6. This round of fund raising is being done to retire some debt and for working capital. I was not able to gather clearly the thought process of management on releasing the pledge.
7. For Q1 PBT/Ebitda was 27/89 or 30%. With retiring debt, leasing business scaling and reporting less losses, BESS contributing and EPC further growing, I expect that this ratio would improve 35% by end of year. And so my expected PBT for 2024-25 is 140 crores and with roughly 30% tax rate they should report PAT of 100 crores. At current market cap 3600 crores the stock is discounting my expected current FY earnings by 36 times.
8. The main play in Gensol if things would fall in place would possibly start coming in 9-12 months from Q4 of current FY or Q1 of 2026 when the leasing would start contributing to profitability, BESS will start adding meaningful profit and Solar EPC would remain as strong as it is now. Please note that both BESS and Leasing are 90% EBITDA margin businesses. I am still not hoping much from EV; but many times, things from which you do not have much hope surprise you.

I am not an analyst and these are just simple notes from a retail shareholder from the earnings call and his interpretations. Please do not take it as buy or sell recommendation.
Krishna