Solex Energy – Undervalued Solar PV Manufacturer or Microcap Value Trap?

Concall brief generated using NotebookLM:

Solex Energy Ltd. H1 FY25 Post Earnings Conference Call Briefing Doc

Date: November 13, 2024

Attendees:

• Solex Energy Management:
• Chetan Shah, Chairman & Managing Director
• Piyush Chandak, Executive Director
• Vipul Shah, Director
• Investors/Analysts

Main Themes:

• Strong H1 FY25 Performance: Solex Energy reported robust financial results for the first half of FY25, despite extended monsoon season impacting project readiness. The company achieved significant growth in revenue and maintained healthy EBITDA margins.
• Ambitious Expansion Plans: Solex outlined its Vision 2030, targeting 15 GW of module manufacturing and 5 GW of cell manufacturing by 2030. This includes a near-term expansion to 4 GW module capacity by June 2025.
• Focus on Technology and Innovation: Solex emphasised its commitment to adopting cutting-edge technologies, including N-Type TOPcon, back-contact, and HJT solar technologies. They are actively working on improving production line efficiency through AI and machine learning integration.
• Global Market Strategy: While prioritising the rapidly growing Indian market, Solex is also actively pursuing export opportunities in Europe and the U.S. The company believes it is well-positioned to leverage its strong relationships with both domestic and international brands.
• Financial Prudence: Solex is committed to a balanced approach of debt and equity financing for its expansion plans. They are actively engaging with investors and maintaining a healthy working capital cycle.

Key Highlights and Facts:

• H1 FY25 Revenue: ₹930 million (compared to ₹XX million in H1 FY24)
• Target Revenue FY25: ₹800 crores (₹650 crores from modules & ₹150 crores from EPC)
• Target Revenue FY26: ₹2,400-₹2,500 crores
• Target Revenue FY27: ₹3,400-₹3,600 crores
• EBITDA Margin Target: 9%-11%
• PAT Margin Target: 5%
• Current Module Production: 50,000 modules per month
• Target Module Production (December 2024): 125,000 modules per month
• Total Assets (estimated): ₹415-₹420 crores
• Total Debt (estimated by end of FY26): ₹300 crores
• Working Capital Requirement (for ₹1,300-1,400 crores revenue): ₹200-₹250 crores

Key Quotes:

• On Indian renewable energy opportunity: “Currently the Indian RE target is 500 GW, but India can do even 1 TW, which is 1,000 GW also.” – Chetan Shah
• On Tapi-R module technology: “Tapi-R is a new product which is actually invented by the consortium of leading global brands… the modules dimension is not majorly different… and which generates better output.” – Chetan Shah
• On Solex’s unique strength: “We are very unique that way in terms of compared to any other Indian modules manufacturer those who are larger than us and those who are smaller than us.” – Chetan Shah
• On overcapacity concerns: “I’m confident that we are not into the overcapacity. And so, whatever that India demand is, we’ll be able to fulfil it, and we’ll be able to justify our installed capacity.” – Chetan Shah
• On N-Type TOPcon technology: “Now there is a lot of improvement which has happened in N-Type TOPcon technology for the Indian climatic conditions. So I think by the beginning of ’25, you will have a better product quality…” – Chetan Shah
• On U.S. manufacturing plans: “As I said, like we are comfortable manufacturing right now at present in India and supplying to USA. Once we find any good opportunity, long-term sustainable because my focus is always on OpEx part of a setup.” – Chetan Shah

Analyst Takeaways:

• Solex Energy appears to be strategically positioned to capitalize on the robust growth in the solar energy sector, both domestically and internationally.
• The company’s commitment to technological advancement, coupled with its strong financial discipline, makes it an attractive investment proposition.
• Investors should monitor the company’s progress in achieving its ambitious expansion targets and its success in penetrating new markets like the U.S.

Disclaimer: This briefing document is based solely on the provided transcript of the Solex Energy Ltd. H1 FY25 Post Earnings Conference Call. Further research and due diligence are recommended before making any investment decisions.