Last year, we wrote to you about what to expect from India’s Leading Renewable Energy Reserve by 2022.
We’ve covered the top companies in the space and their plans for the coming years.
The topic of renewable energy (RE) has come to the fore with India rapidly becoming one of the world leaders in making the transition to renewable energy.
The country is fighting climate change head-on. What started as a renewable energy target of 225 GW by 2022, has been upgraded to 450 GW by 2030, and finally 50% of the country’s energy comes from renewable vehicles by 2030.
This is complemented by serious policy reforms. In a decisive move, the Indian government implemented a customs duty of 40% on solar modules and 25% on solar cells, helping the domestic sector to empower the industry. This sector achieves competitiveness in terms of size, economy and exports.
These ambitious goals are backed up by realistic announcements made by some of the leading traders in the country. This includes commitments by the state-owned NTPC at 60 GW, Adani Green Energy at 45 GW and Tata Power, ReNew Power and Acme Solar at 25 GW each.
As of March 2022, India’s renewable energy capacity is 156.61 GW, accounting for 39.2% of total installed electricity capacity and providing great opportunity for the expansion of green data centers.
Solar energy is the largest contributor to the total renewable energy addition capacity with 34.5%, followed by wind energy with 25.8%.
The renewable sector added more new capacity than the traditional energy sector in 2022 for the fourth consecutive year, with clean energy accounting for nearly half of total installed energy capacity in the country.
While solar and wind sources are the frontrunners in the renewable energy race, green hydrogen has been gaining a lot of attention lately.
There’s growing excitement green hydrogen could be the fuel of the future, powered by renewable energy. This offers tremendous growth potential and is quickly becoming a major investment trend.
It has reached a point where economic progress over the next century can be determined solely by climate investments. This bodes well for companies leading the renewable energy race.
However, investing in companies that produce renewable energy is not the only way to weather this wave. You can also look at original equipment manufacturers (OEMs), who also benefit greatly, offering high margins.
Last time we talked about Websol Energy and Sterling Wilson Solar. While these names are still relevant, we have added more to the list.
So, with this in mind, we highlight a new list of the top 3 renewable energy storage sources and what you can expect from them in 2023.
#1 Websol Energy
First on our list is Websol Energy.
Websol Energy is a leading manufacturer of photovoltaic monocrystalline solar cells and modules in India.
As we last write, the company is on track to expand capacity in 2022. While expansion plans are still underway, the company plans to more than seven times its existing capacity (approximately 250 MW). ) to maintain its position as one of the largest solar cell manufacturers in India.
Furthermore, it has outlined ambitious plans to raise capital to upgrade its existing equipment with the latest and most efficient technology. This makes it possible for the company to profit from the green energy revolution.
Websol went into operation as an export-oriented unit purely serving Europe (mainly Germany and Italy) and the United States. They have been in this business for over two decades now and are renowned for their high quality products. They offer a wide range of products ranging from 5 W to 220 W, meeting the needs of home, commercial and industrial organisations.
While the company increased sales by 38.8% last year, net profit fell by 80%. But this is an anomaly as margins haven’t fallen much in FY 2022. However, the company’s profits are higher in FY 2021 due to a special one-time category that makes 2022 seem bad. Well-financed balance sheet with negligible debt on the books.
The company’s unstable past performance was mainly due to weak electricity demand, fierce competition from China and the pandemic.
Now, with capacity expansion underway, the company is unlikely to turn a profit in the near term. However, this is only temporary as the new capacity will help them to be highly efficient and ready to benefit from this huge investment trend.
#2 Sterling and Wilson
Next on our list is the same company we mentioned in the previous section, Sterling and Wilson Solar.
Sterling and Wilson Solar is a global solar engineering, procurement and construction (EPC) solutions provider with a broad presence in 26 countries.
The company’s unrealized EPC order book stands at Rs 26 billion as of October 2022, with almost 78% domestic EPC, indicating a healthy growth in the business next year. Domestic businesses offer higher profit margins and potentially increased profits. This, together with the reduction in input costs, bodes well for the company in the coming years.
As we wrote in the previous article, the company has two large EPC projects with a total capacity of 400 MW under construction in the US.
However, that activity stalled significantly in 1HCY22 due to a Commerce Department investigation into the import of modules. But the new directive in June 2022 eased the import of the module allowing the company to continue its work.
Sterling and Wilson Solar have added significant capacity that will come online by the end of fiscal 2023. Furthermore, the company is expanding its renewable energy offerings to include EPC solutions for plants hybrid energy electricity, store energy and turn waste into energy.
Acquired by Reliance in 2021 (40% stake), the company provides EPC services mainly for utility-scale solar power projects. It has implemented projects with a capacity of more than 10 GW across geographies including Australia, USA, Asia, Africa and the Middle East. International operations account for more than 80% of total revenue.
The unprecedented super cycle of commodities in the past two years along with covid has caused the Solar Industry to suffer huge losses and delayed IPP projects. Revenue and gross profit growth in the past year were 2.3% and 38%, respectively. The company is incurring a net loss.
However, this is likely to change with the new series of announcements. Solar installations have grown at a CAGR of 15% over the past 5 years and are likely to repeat the same in the future.
Moreover, the company’s strong balance sheet will also help the company grow further.
#3 Borosil Renewable Energy
The third company on our list is a new entrant, Borosil Renewables. Borosil Renewables is the first and only solar glass manufacturer in India.
The company has outlined an expansion plan that will lift India’s capacity from 450 TPD (tons per day) to 1,000 TPD by October 2022 and 2,100 TPD by the financial year ending 2025. This will lead to to a capital cost of about Rs 15 billion .
Furthermore, it recently acquired the Interfloat group, the largest producer of solar glass in Europe, with an active production capacity of 300 TPD in Germany. They plan to increase this to 500 TPD by 2023. While this seems ambitious, the company has already achieved it.
Borosil Renewables, part of the six-decade old Borosil Group, commissioned its first solar glass production facility at Baruch in Gujarat in January 2010 with a capacity of 180 TPD. This has been expanded to 450 TPD or 2.8 GW of solar modules. Current capacity can power up to 2.5 gigawatts (GW) of solar energy.
In the solar panel glass business, Borosil meets 40% of the domestic demand with 650 tons of glass per day, the rest is imported from China and Malaysia. In addition to meeting the country’s growing demand for solar glass, the company also ships to Germany, Poland, Canada, USA, Mexico and the Middle East. This includes nearly 20% of its current solar panel capacity.
Sales have grown 28% over the past year, recovering well from the pandemic-induced decline. However, profits have skyrocketed, doubling in the same period. High profitability has boosted return on equity. It increased from 14% in FY 2021 to 21% in FY 2022.
The company boasts a strong balance sheet with a low debt-to-equity ratio of 0.2x. Interest payment ratio is very high at 79.5 times in fiscal year 2022.
The renewable energy sector continues to be loved by industrialists and investors worldwide. High-ticket investments have set the sector and the companies operating within it into rapid growth in the coming years.
A company’s plans are an insight into its long-term vision. It helps to analyze and understand the steps to take to achieve the same.
Therefore, an investor must pay more attention to these plans. Analyze them carefully to understand if the company’s roadmap is feasible or not. Only then can you make the right choice.
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
This article is compiled from Equitymaster.com
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