January 2, 2025
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Stock Market

Market leader solar stock falls after JP Morgan downgrades it by 13%; Should you sell it?

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Stock Market

Market leader solar stock falls after JP Morgan downgrades it by 13%; Should you sell it?

Shares of this mid-cap company, specializing in the production of integrated solar cells and solar panels, declined by nearly 2 percent in Thursday’s trading session following a reputed brokerage firm, JP Morgan, highlighting downside potential for the stock.

Price Movement

During Thursday’s trading session, Premier Energies Ltd’s share price dropped to an intraday low of Rs.1,309.70 per share, marking a 1.7 percent decline from the previous close of Rs.1,332.60 per share.

The company debuted on the BSE and NSE on September 3, 2024, with a listing price of Rs.990 each, a remarkable 120 percent premium over its IPO issue price of Rs.450 apiece. Premier Energies shares peaked at an all-time high of Rs.1,388.00 per share, delivering a 208 percent return.

What happened

Premier Energies has received a Neutral rating from JPMorgan, with a target price of Rs.1,148 per share. The stock is currently trading at Rs.1,314.50 each, implying a downside potential of approximately 13 percent.

The report indicates that the supply of domestic solar cells is expected to grow at a faster rate, which could put pressure on pricing and margins. However, Premier Energies may benefit from List II policies, potentially helping to sustain local price premiums for a longer duration.

Despite these possible advantages, JPMorgan highlights that, due to the competitive market environment, it is challenging to justify higher margins or EBITDA for the company.

Recent Contracts

Premier Energies Ltd has secured multiple orders from 8 domestic customers and 1 international customer for the supply of solar PV cells and modules.

These one-time contracts include orders awarded by both domestic and international entities, with a total value of Rs.765 crores, comprising Rs.632 crores for solar PV modules and Rs.133 crores for solar PV cells. The supply is scheduled to commence in July 2025.

As of October 2024, the company has a total order book of Rs.6,906.6 crore, of which nearly 22 percent are from public sector undertakings and government entities, while the rest are from private players.

Installed Capacity

Premier Energies Limited is the second largest solar cell manufacturer in India with an annual installed capacity of 2 GW and a 25 percent market share and it is the 4th largest manufacturer of solar modules with an annual installed capacity of 4.13 GW out of India’s 72 GW Capacity and 6 percent market share.

Capex Plans

Premier Energies has an installed capacity of 2GW Solar cell manufacturing facility with work going on for setting up a 1GW along with goals of expanding it to 7 GW and a 4 GW Solar Module manufacturing facility with goals to expand it to 8 GW with a capex plan of Rs.3,400 Crores by part financing it with the IPO proceeds and funding from other sources.

Revenue Segments

The company generated 64.32 percent of its revenue from the sale of solar modules, 22.48 percent from the sale of solar cells, 4.3 percent from EPC Projects, and 8.21 percent from the sale of traded goods. Revenue share from the domestic market is 86.01 percent and exports were 13.99 percent.