Fundamental Analysis Of Waaree Renewable Technologies: Electricity is a necessity and there would be no commercial activity in the economy without energy. Industries and Households require electricity in day-to-day activities and operations. In this article, we are going to fundamentally discuss a company that is into Solar Power Supplier as well as undertake projects on Installation. They are one of the major players in the Solar Industry – Waaree Renewable Technologies Limited.
In this Fundamental Analysis Of Waaree Renewable Technologies, we take a look at their operations, industry, financials, future plans & more.
Table of Contents
Fundamental Analysis Of Waaree Renewable Technologies
Company Overview
Waaree Renewable Technologies Limited (WRTL) started in 1999 under Waaree Energies Limited holding a controlling stake of 74.51%. WRTL conducts its business in the Engineering, Procurement, and Construction Solutions (EPC), financing, owning, and construction of Solar Projects. Their products and services involve Rooftop Solar, Floating Solar, ground-mounted solar, Operations and maintenance.
They provide the service of installation of the RESCO model which comprises installation, financing, operation, and ownership of rooftop solar project development and supplying generated energy from customers to the power grid using net metering.
Business Segments
The company earns its revenue from the Sale of Services through Operations and management at 2.3%, EPC at 94.98%, and Electricity generation from renewable sources at 2.72%.
Industry Analysis
The Solar Power Industry in the Energy Sector is bound to increase due to ongoing demand as the public, government, and industries tend to move away from fossil fuels. Alternatives have been on the rise like Solar, Wind, and Nuclear Energy as these sources have less or zero emission contribution to the global climate.
Rapid Industrialization, urbanization, and globalization have made India stand as the 3rd largest energy-consuming nation. These opportunities are lucrative and have the potential to reach 1,000+ Gigawatts (GW) from the current 160 gigawatts. The Indian Government has also allowed FDI to energy & distribution of 100% to further bolster investments.
Waaree Renewable Technologies – Financials
Revenue and Net Profit Growth
The Company reported Rs.350.96 cr in FY23 as against 161.49 cr in FY22 with an increase of 117.3% on the back of huge demand for EPC Contracts.
Net Profit grew to 55.33 cr in FY23 from 8.89 cr in FY22 on account of volume expansion of the Solar Contracts. However, with an exponential growth in Net profits, CAGR growth cannot be compared.
| Financial Year | Revenue (Cr.) | Net Profit (Cr.) |
|---|---|---|
| 2022-23 | 350.96 | 55.33 |
| 2021-22 | 161.5 | 8.89 |
| 2020-21 | 12.98 | -2.37 |
| 2019-20 | 5.68 | -3.18 |
| 2018-19 | 7.04 | -1.87 |
| CAGR (4 Years) | 166.1 | - |
Profit Ratios
The company had a volatile business in the early stages as the Operating Profit Margin was 23.86% in FY23 up from 14.55% in FY22. As we know from the data of previous years the margins are not stable due as their earnings were dependent on the number of contracts.
Net Profit Margin is fluctuating due to changes in the interest and tax payments as the company business was subdued in the initial days.
| Financial Year | OPM | NPM |
|---|---|---|
| 2022-23 | 23.86% | 15.77% |
| 2021-22 | 14.55% | 5.50% |
| 2020-21 | 53.85% | -18.26% |
| 2019-20 | 6.69% | -55.99% |
| 2018-19 | 45% | -27.13% |
| Average (5 Years) | 28.79% | -16% |
Return Ratios
The company growth in RoE was 96.9% in FY23 as compared to 34.08% in FY22. If we take previous years into consideration the growth in Industry and government subsidy and support to the industry has placed well. The return on equity is likely to increase after years of negative growth.
In the RoCE metric, the company has 84.06% in FY23 compared to 26.67% in FY22 showing exceptional growth in earnings. With earnings likely to rise they can further borrow the funds if required for expansion.
| Financial Year | RoE | RoCE |
|---|---|---|
| 2022-23 | 96.90% | 84.06% |
| 2021-22 | 34.08% | 26.67% |
| 2020-21 | -9.81% | 7.55% |
| 2019-20 | -18% | 1.71% |
| 2018-19 | -19.55% | 10.48% |
| Average (5 Years) | 16.72% | 26.09% |
Debt Analysis
The Company has significantly reduced its exposure of Debt from its capital structure from 1.4 in FY22 to 0.46 in FY23. The debt reduction measure helps the company to conserve cash for further business activities.
Interest Coverage ratio is improved due to a sudden increase in Profit from 4.06 times in FY22 to 15.52 times in FY23. However, they can improve their profit returns with a growing industry and can further take advantage of debt if necessary for expansion. Typically these businesses are more capital-intensive and these metrics are promising for further growth.
| Financial Year | Debt to Equity | Interest Coverage |
|---|---|---|
| 2022-23 | 0.46 | 15.52 |
| 2021-22 | 1.4 | 4.06 |
| 2020-21 | 5.26 | 1.78 |
| 2019-20 | 1.53 | 0.28 |
| 2018-19 | 3.96 | 1.38 |
| Average (5 Years) | 2.52 | 4.6 |
Future Plans
> The company has forayed into Green Hydrogen installation and even secured a contract of 1 Megawatt. This would be a great opportunity to showcase the quality and could help gain contracts in the future.
> The ability to produce electricity by the company known as an Independent Power Producer (IPP) might help in widening margins and profitability.
> Providing services in the Interstate Transmission System (ISTS) apart from EPC will enhance growth in revenue diversification.
> Expansion in Solar installations can help in Operations and Management segments in both Domestic and International Markets.
Key Metrics of Waaree Renewable Technologies
We have taken a view on the fundamental analysis of Waaree Renewable Technologies , Let’s take a look at some Key Metrics.
| Particulars | Figures | Particulars | Figures |
|---|---|---|---|
| CMP | 1,414.45 | P/B | 30.12 |
| EPS | 27.16 | P/E | 44.37 |
| RoCE | 96.9% | RoE | 96.90% |
| Promoters Holding | 74.48% | Market Cap (Cr.) | 2,963.42 |
| Enterprise Value (Cr.) | Rs.2,899.47 | Dividend Yield | 0.13% |
Conclusion
After looking into the fundamentals analysis of Waaree Renewable Technologies, Let’s take a look into the company in brief. Waaree Renewables are into Engineering, Procurement, and Construction (EPC) and the prospects of earnings in recent reports suggest a brighter future as well as Industry growth looks intact with government push and support.
The earnings growth might help the stock move further. What would your views on the current P/E on the stock? Will that be sustained through earnings? Let us know your thoughts on this.
Written by Santhosh
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