Waaree Energies vs Premier Energies: Who’s set to shine brighter in Q1?

In its June quarter preview note, Kotak Institutional Equities expected strong results from Waaree Energies and Premier Energies due to several positive factors in the solar manufacturing sector, including ongoing capacity expansions and stable pricing. The continued growth in solar capacity and the strategic scaling up of production facilities are significant contributors to this positive outlook.

For Waaree Energies, Kotak projects a 32 per cent year-on-year and 12 per cent quarter-on-quarter growth in revenues. This growth is expected to be driven by the scaling up of its 5.4 GW cell facility and enhanced utilisation rates. The company is also forecasted to see a 470 basis points improvement in margins compared to the previous year. Additionally, the strong growth in the EPC business is anticipated to further bolster Waaree’s financial performance.

In contrast, Premier Energies is projected to achieve an 11 per cent year-on-year growth in revenues. This growth is attributed to higher utilisation of its production capabilities and the recent commissioning of its 1.6 GW module facility. Kotak’s expectations reflect a modest contribution from the new facility to Premier’s performance, which could potentially increase as the facility ramps up its operations.

Overall, Waaree Energies is expected to outperform Premier Energies, with stronger revenue growth of 32 per cent year-on-year and profit growth of 65 per cent, compared to Premier’s 11 per cent and 45 per cent, respectively.

Despite these optimistic projections, Kotak has maintained ‘Sell’ ratings on both Waaree Energies and Premier Energies. The fair value targets are set at Rs 2,620 for Waaree Energies and Rs 900 for Premier Energies, indicating a cautious outlook on their stock performance. This conservative stance is reflective of the broader market dynamics and potential challenges that may impact long-term growth.

Kotak’s analysis suggests an EBITDA margin of 20.9 per cent for Waaree Energies, an improvement of 473 bps year-on-year, though 220 bps weaker quarter-on-quarter. This margin enhancement is driven by economies of scale and a favourable customer mix. The normalization of EPC margins is expected to impact the quarter-on-quarter comparison.

For Premier Energies, Kotak forecasts an EBITDA margin at 29.4 per cent, a significant year-on-year improvement by 774 bps. However, the margin is expected to be 325 bps weaker on a quarterly basis, influenced by a higher contribution from lower-margin module business. The focus on improving capacity utilization and increasing contributions from high-margin products is crucial for sustaining growth.

The note from Kotak also highlights broader industry trends, including the significant solar capacity additions witnessed in FY2025 and the expectation of continued momentum into FY2026. The solar industry’s potential in the US market remains buoyed by anti-dumping duties on Southeast Asian countries, presenting opportunities for Indian manufacturers. The strategic positioning of Indian companies in this evolving landscape could offer competitive advantages.

Overall, while both Waaree Energies and Premier Energies are poised for notable growth in the short term, Kotak’s ‘Sell’ ratings reflect concerns over long-term stock performance amidst evolving industry dynamics and market conditions. The balance between immediate growth prospects and future uncertainties remains a critical consideration for investors.