Premier Energies Ltd. (Subscribe)

Highlights

Premier Energies Limited (PEL) incorporated on 1995, is engage in the business of manufacturing of solar cell and solar module manufacturer. It is the 2^nd largest solar cell manufacturer in terms of annual installed capacity as of FY24 with an aggregate annual installed capacity of 2 GW for solar cells and 4.13 GW for solar modules.

Their business offering includes. (i) manufacturing solar photovoltaic cells, (ii) producing solar modules, including custom panels tailored for specific applications, (iii) executing EPC projects, (iv) generating power (v) providing O&M services for EPC projects and (vi) selling various other solar-related products.

PEL established a 75 MW capacity solar cell manufacturing line in 2011 before manufacturing solar cells at scale through the introduction of a solar cell line with an annual installed capacity of 500 MW in FY21 and 250 MW in FY22. The experience they gained through this process is one of the contributing factors which led to development of their bifacial monocrystalline PERC solar cell based on the M10 – 182mm x 182 mm format in 2022. On a monthly basis, they are able to manufacture up to 14 mn M10 sized solar cells.

The company manufacture solar cells and solar modules across 5 manufacturing facilities, all of which are situated on land that they own, in Hyderabad, Telangana, India. Currently in Units I, IV and V, they only manufacture solar modules while in Unit II, they manufacture both solar cells and solar modules and in Unit III, they only manufacture solar cells.

Their key customers across their business offerings include several IPPs, OEMs and off-grid operators such as NTPC, TATA Power Solar Systems Limited, Panasonic Life Solutions Private Limited (Panasonic), Continuum, Shakti Pumps, First Energy, Bluepine Energies Private Limited, Luminous etc.

Out of the total proceeds of Rs. 28,304 mn, Rs. 9,686 mn would go towards Investment in their Subsidiary, Premier Energies Global Environment Private Limited for part-financing the establishment of a 4 GW Solar PV TOPCon Cell and 4 GW Solar PV TOPCon Module manufacturing facility. ~Rs. 3,228 mn would go towards general corporate purpose and Rs. 5,000 mn would go towards existing selling shareholders of the company.

Key Highlights

• India’s module manufacturing capacity reached approximately 72 GW in FY24 and while its current solar cell manufacturing capacity stands at 8.1 GW, it is also poised for future exponential growth. With the market for solar modules expected to continue to grow in India on account of ambitious government targets and increasing demand for clean energy according to PEL intend to capitalize on this growth momentum.
• As of Q1FY25 the company has an orderbook of Rs. 59,265 mn which is ~1.88x of FY24 sales of the company which is executable in 18 months. Out of total orderbook Rs. 16,091 mn was in relation to non-DCR solar modules, Rs. 22,140 mn was in relation to DCR solar modules, Rs. 18,911.18 mn was in relation to solar cells and Rs. 2,122.72 mn was in relation to EPC projects.
• PEL is one of the first in the Indian solar sector to backward integrate solar cell manufacturing with solar module production and Largest Indian solar cell exporter to US market with nearly 100 pct market share.
• At present, they have five manufacturing facilities and they are on course to commission a TOPCon solar cell line in Unit II with an annual installed capacity of 1,000 MW within FY25. The company is Completely transitioned to MonoPERC and now moving to TOPCon.
• According to F&S, TOPCon solar cells are capable of achieving efficiencies between 24.5 pct to 25.2 pct compared to between 23.2 pct to 23.7 pct for PERC cells. PEL believe the ability to adapt to new and ever-changing technologies, as evidenced by their transition from polycrystalline cells to monocrystalline cells and now to TOPCon cell technology, is one of their key strengths.
• The company has signed MoU in April 2024 with an International solar wafer and solar module manufacturer and an international semiconductor wafer supplier In India to establish a new company dedicated in wafering solar bricks into wafers.
• PEL also expanding its geographical presence in US. They have signed LoI with Heliene USA Inc in February 2024 to establish a Joint venture to develop, construct and operate a TOPCon solar cell manufacturing facility in United States and Gain from partner’s human and financial resources along with supply chain, logistics and regulatory expertise.
• PEL key strategies includes (i) To expand their overseas presence and increase exports especially in the U.S. market through strategic backward integration of production chain and establishing manufacturing capabilities outside of India. (ii) Develop and grow their rooftop solar offering. (iii) Capitalize on available market opportunities to grow their domestic business continue to focus on improving operating efficiencies (iv) Expanding and upgrading manufacturing capacities using the latest technology.
• Sales of the company has grown by ~105.71 pct CAGR During FY22-24 and EBITDA of the company grew ~206.7 pct CAGR over same period. Company reported sales of Rs. 31,438 mn in FY24 which increased by ~120 pct YoY, while EBITDA jumped by 347 pct YoY to Rs. 5,053 mn as EBITDA margin expanded from 7.90 pct in FY22 to 16.07 pct in FY24. As of FY24 the company reported profit of Rs. 2,343 mn against loss of Rs. 133 mn. During Q1FY25 the Sales/EBITDA/Profit came at Rs. 16,574 mn/Rs. 3,679 mn/Rs. 1,982 mn which jumped by 171 pct YoY/379 pct YoY/532 pct YoY.

Key Risk

• PEL face intense competition in their markets, and they may lack sufficient financial or other resources to maintain or improve their competitive position.
• The continued decrease in prices for renewable energy products such as solar cells and solar modules may adversely affect their business, financial condition and results of operations.
• If inflation were to rise in India, PEL might not be able to increase the prices of their products and services at a proportional rate in order to pass costs on to their customers and their profits might decline.

Financial Performance and KPI’s

Valuation

Premier Energies Limited is one of the 1^st in the Indian solar sector to backward integrate solar cell manufacturing with solar module production company with an aggregate annual installed capacity of 2 GW for solar cells and 4.13 GW for solar modules.  PEL is well placed to capitalise on government ambitious plan of ~300 GW solar renewable energy capacity by 2030. At the upper end of the price band of Rs. 900 the issue is priced at a PE of ~25.6x of its FY25E annualised earnings. The issue looks fully priced. However, one can subscribe for longer-term perspective.

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