Solar manufacturing is just like any industrial manufacturing activity driven by
- falling cost curves
- demand supply imbalances
- Tariff and non-tarriff barriers
What distinguishes the industry is the falling Levelised cost of energy promoting the transition leading to an accelerated adoption curve and hence scalability to players who can execute at scale. It gets valued like any other manufacturing company with caveat of faster equipment write offs and necessary capex needed to constantly upgrade technology
Given the importance of energy in economic activity, there is a high degree of trade barriers and policies that dictate outcomes and profitability. This policy risk becomes key monitorable from investors’ perspective
Regards to Indian solar players, key risk are
- Access to RM and Equipment
- term of trade and advances from ROCE perspective is key risk
- Competitive intensity, and Execution are key like any other business
Deep dive requires constant monitoring and reassessment of key data points and hypotheses. As they say, business is not a still picture but an evolving movie.
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