Waaree Energies Gets Jefferies' Initiation On Positive Policy Changes

Jefferies initiated coverage on Waaree Energies Ltd. with a 'hold' rating, and a target price of Rs 2,030 apiece. The brokerage is 'making hay while the sun shines', it said.

Favourable government policies, increasing demand for solar installations, and global shift away from Chinese-made modules are positives, according to the brokerage. The long-term sustainability of the company depends on its ability to adapt to market adjustments and policy changes, it said.

Analysts also call for investors to closely monitor trends and policy changes as long-term growth visibility is based on policy changes.

Waaree Energies is a leading player in India's solar PV module manufacturing sector, according to Jefferies. With a current module capacity of 13.9 GW, the company is expanding its capabilities, including a 5.4 GW cell capacity under commissioning and 6 GW wafer-to-module capacity under development.

The brokerage also notes that Waaree is India's largest exporter, with recent commissions worth 1.6 GW module plant in the United States. The Indian solar installation market is projected to grow at a robust 24% by financial year 2028, according to Jefferies.

This growth is driven by government policies favouring domestic module manufacturing, such as anti-dumping duties and Domestic Content Requirement for eligibility in government schemes. Similarly, the United States' policy of reducing reliance on Chinese modules has opened an exporting opportunity for Indian exporters.

Both Indian and US policies are creating shortages, driving up module prices and profitability. The DCR policy in India and the US policy keeping Chinese modules at bay are key drivers.

Waaree's strategic move to integrate backward into cell and wafer manufacturing ensures a stable supply chain and enhanced profitability, particularly in the DCR market.

Further, the commissioning of the US plant and the broader US policy shift create a significant export opportunity for Waaree. This is also supported by stronger-than-expected domestic solar installations.

By financial year 2028, India's module manufacturing capacity is expected to double and this could lead to oversupply. This would deteriorate economics for non-DCR modules, those using imported cells.

The US is rapidly increasing its domestic module capacity, which could reduce import demand by 2028. This could impact Waaree's export potential. With these changing trends, the brokerage expects Waaree's profitability to normalise to financial year 2015 levels by financial year 2030.

Other factors that could negatively impact the company is relaxation of DCR rules in India, reduction of IRA benefits in the US, or reduction in duties on Chinese modules, Jefferies said.

Waaree stock rose as much as 0.64% during the day to Rs 2,138.9 apiece on the NSE during trade on Thursday. It has declined 25.07% in the last 12 months. The relative strength index was at 25.07.

One out of two analysts tracking the company has a 'hold' rating on the stock and one recommends a 'sell', according to Bloomberg data. The 12-month analysts' consensus target price on the stock is Rs 2,155, implying an upside of 1.4%.