Shares of Waaree Energies will be in focus today, July 14 after global brokerage UBS downgraded the stock from 'buy' to 'neutral' citing ambitious capex amid sector challenges.In its recent note, the brokerage cut the target price of the stock Rs 3,100 from its previous target of Rs 4,400. Despite the latest cut, the current target price indicates an upside of 7% from Waree Energies' shares closing price on Monday, July 12.
While downgrading Waaree to Neutral, UBS highlighted its preference for its peer Premier Energies, over stronger execution track record and judicious expansion plans. According to UBS, Waaree Energies' Rs 300 billion of capex planned over FY26-29 is "ambitious and aggressive".
Industry leaders are accelerating the expansion of integrated solar manufacturing capacity, however recent results highlight that the sector is facing pressure on operating margins and cash flows, driven by higher input costs and slower-than-expected ramp-up in cell capacity.
In case of Waaree, cell or wafer-ingot capacity build-out should help it to retain leadership in the sector, while the brokerage believes that a disciplined balance-sheet management and timely capex execution are critical due to its ambitious plans. Investors are also expected to focus on the profitability and scalability of BESS manufacturing in a market that is currently largely dependent on imports.
UBS also expects limited returns from newer verticals such as BESS and glass, along with higher capital intensity, which are likely to weigh on return on capital employed (ROCE) more on Waaree than Premier. While flagging these challenges, the brokerage remains constructive on Waaree's expansion strategy, expects limited impact on profit after tax, as lower below-the-line costs partly offset the EBITDA cut.
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