Waaree, Premier Energies See Better Returns On Exports — Here's Why
Waaree Energies Ltd. and Premier Energies Ltd. were among the top five solar module makers in India in 2024, as per capacity. But despite strong domestic demand in India, the companies make a large part of their revenues from US exports and are even planning to build more capacities there.
This is mainly because of the unit economics and higher profit potential from the export markets.
US Contribution
Waaree Energies is the largest manufacturer and exporter of solar modules in India currently. The company generated 58% of its revenues from export sales in FY24, with the US being the key export market for the company.
Premier Energies derived 8.77% of its total FY24 revenues from the United States. While exports do form a smaller chunk of the company's total sales, Premier Energies does state that it was the largest Indian solar cell exporter to the US market. The company had 100% market share in the area as of FY24.
Unit Economics
The profitability and return profile of a solar manufacturing company depends on several factors, like level of backward integration, end markets, competitive intensity and location of manufacturing.
Module export to the US and US module manufacturing are the most profitable markets for Indian companies, according to Kotak Securities.
While return on capital employed for the manufacturing of various solar modules in India stands at 22%-28%, export of domestically produced modules could yield returns of over 72%.
Complete backward integration of the solar module manufacturing process over the medium term would help companies, Kotak said. Moreover, companies with local US manufacturing presence would continue to enjoy an advantage over peers in terms of higher utilisation and superior profitability, as per the brokerage.
Strategy For US Markets
Waaree Energies is currently building a 1.6 GW solar module plant in the USA, for which, the trial production has already started. The company also plans to build a 3.4-GW solar module and 5-GW solar cell plant in the country in the future. The management has also always emphasised how the solar energy's cost advantages will help drive future growth in the US markets.
Premier Energies has announced a joint venture with Heliene Inc., a Canadian solar module maker. Premier plans to set up a 1.2 GW solar cell manufacturing unit in the US. The company does however remain cautious regarding the US expansion amid political developments. Management indicates a 'wait and watch' strategy, while monitoring the impact of potential policy changes on the Inflation Reduction Act.
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