Waaree Energies' share price has corrected nearly 23% in 2025 so far, seeing a volatile movement in the past month.
Waaree Energies is India's biggest solar module maker with a 13 GW manufacturing capacity today. The company was also the first Indian manufacturer to tap into the US market — which has historically helped its profitability — and is the leading solar module exporter.
Focus On US Market
Waaree Energies was amongst the first Indian solar module manufacturers to foresee the supply void created in the US after it put import barriers on China. This led to the company shifting to an export focused strategy in FY22.
This resulted in a jump by 14 times in Waaree's export sales from Rs 480 crore in FY21 to Rs 6,570 crore in FY24. Exports accounted for 57.6% of the company's revenues in FY24 versus 24.6% in FY21.
With US prices at $28 cents/watt in late 2024, it achieved 20% margins from exports, significantly higher than the margins seen within India, as per Kotak Securities.
Concerns Regarding US Market
The future of the US market which has historically helped Waaree Energies is now unclear. Concerns initially started creeping in on January 20, when the new US administration passed an executive order called 'Unleashing American Energy'. This indicated a pause on US IRA (Inflation Reduction Act) incentives.
The IRA's incentives were designed to boost domestic solar energy adoption in the US. This led to the company deciding to set up a 1.6 GW module facility in Houston, Texas, with a potential to expand it to 5 GW by FY27. The pause of the $7 cents per watt peak rebate that IRA offers impacts the profitability and future expansion plans in the country. As per Kotak Securities, without the IRA rebate, Waaree's US facility operating margins will reduce from 44% to 20%.
Till now there has been no further communication from the US administrations regarding the incentives, as per the company's management.
Furthermore, there is also a possibility of US imposing solar module import tariffs on various exporting countries like India. These potential tariffs can hurt the company's order book.
The Street is also concerned about a potential rollback of pro-renewables legislation in the US. This has caused a lack of clarity on the future of the company's US order book.
Domestic Concerns
On the domestic front, the Indian stock market's brutal selloff as well as the resignation of the company's Chief Financial Officer Dilip Panjwani are few of the factors that have led to the stock falling.
From a medium-term perspective, there are also concerns about the company maintaining its current high margin advantage. As of 9MFY25, Waaree Energies' Ebitda margin stood at 17.2%, which marks a 350 basis point annual expansion. Kotak Securities expects this to expand to 23.6% by FY27, but FY28 could see margin pressure.
The margin pressure could potentially be due to the heightened competitive intensity that is set to take place in India, due to major capacity additions coming on stream. As per module capacity expansion announced by various Indian firms, the solar module manufacturing capacity is set to increase from 70 GW in 2024 to 162 GW in 2027.
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