Accumulate Vikram Solar Ltd For Target Rs. 173 by Prabhudas Liladhar Capital Ltd
Margin pressure persists despite revenue growth
Vikram Solar reported revenue of INR15.6bn in Q1FY27, up 88.0% QoQ/38.0% YoY, while module sales stood at ~1GW. Despite a QoQ improvement in module realization to INR15.02/Wp, EBITDA margin contracted to 8.1% as elevated aluminum, copper, EVA and cell costs could not be fully passed through amid intense industry competition. While DCR sales have commenced and management expects DCR volumes to grow 2.0x–2.5x QoQ, the 7.9GW order book remains dominated by non-DCR modules, with 7.1GW entirely comprising non-DCR orders, limiting near-term margin visibility. Management also refrained from providing clarity on FY27 earnings guidance, citing uncertainty around ALMM-II, pricing and DCR mix.
The backward integration timeline has also been pushed out, with the company now targeting a 9GW cell plant earlier planned for commissioning in Q4FY27, now entire capacity potentially spilling into Q1FY28, versus the earlier plan of commissioning 9GW earlier and an additional 3GW by FY28. With a six-month ramp-up period, management expects only 40-50% utilisation during the first year, delaying the margin benefits from in-house cell manufacturing. Further, the company has scaled back its wafer/ingot capacity plan to 9GW from the earlier 12GW, while the next 3GW cell capacity is now planned for FY28 with upgraded technology. The planned ~INR50bn annual capex over FY27-28, with a significant portion expected to be funded through debt, adding to the debt burden during the expansion phase. Given the subdued near-term margin outlook, delayed cell commissioning and significant capex commitments, we remain cautious on the pace of earnings recovery.
We estimate revenue/EBITDA/PAT CAGR of 62.5%/43.2% 25.8% with over FY26-28E. we downward revise our FY27 earnings estimates by 42% while upward revise FY28 earnings estimate by 7.2% factoring higher input costs and sustained margin pressure with revised TP of INR 173 (earlier INR 226) valuing at 5x EV of Mar’28 EV/EBITDA.
Q1FY27: Revenues grew by 37.9% YoY to INR15.6bn (PLe: INR17.2bn). Gross margins contracted by 1250bps YoY to 18.9% (PLe: 31.0%). EBITDA declined by 48% YoY to INR1.3bn (PLe: INR2.1bn). EBITDA margin contracted by 1330bps YoY to 8.1% (PLe: 12.3%). PAT declined by 85.2% YoY to INR198mn (PLe: INR864mn). Module realization stood at INR15.5/Wp in Q1FY27 vs INR14.8/Wp in Q1FY26. Order book stood at 7.9GW as of Jun’26. Module Sales volume increased to 1006 MW in Q1FY27 VS 999 MW in Q4FY26.
Please refer disclaimer at https://www.plindia.com/disclaimer/
SEBI Registration No. INH000000271
