Buy ACME Solar Holdings Ltd For Target Rs.495 by Motilal Oswal Financial Services Ltd
Strong earnings momentum to continue
* In-line 2Q: ACME Solar (ACME) reported revenue of INR8.9b (+2% vs. our estimate) and EBITDA of INR7.5b, in line with estimates. EBITDA margin stood at 85% (vs. our estimate of 83%), while adjusted PAT of INR2.7b beat estimates by 25%, driven by lower finance costs.
* Key things we liked about the result:
1) PPAs have been secured for 92% of the 8.3GW portfolio, providing visibility capacity additions beyond FY28
2) cumulative BESS commissioned capacity reached 5.2GWh, meeting the H1FY27 target while management raised its FY27 BESS commissioning guidance from 10GWh to 12GWh+
3) revenue of INR16b+ for FY27 and INR15b+ for FY28 BESS capacity is locked in, with 90–95% of FY27 and 50– 60% of FY28 capacity contracted
4) management raised its 2030 RE capacity target from 10GW to 15GW.
* Key monitorables:
1) the pace of commissioning against FY27/FY28 renewable capacity addition guidance of 1.5GW and 2.5–3GW
2) progress towards the 15GW RE capacity target by 2030 and sustainability of BESS margin
3) new bidding activity and the pace of PPA signings
* Valuation and view:
We assign an EV/EBITDA multiple of 11x to core FY28E EBITDA and 6x to merchant FY28E EBITDA. After adjusting for net debt, we derive our TP of INR495, implying a 20% potential upside. Reiterate BUY.
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