Buy Fujiyama Power Systems Ltd For Target Rs.500 by Motilal Oswal Financial Services Ltd
Strong volume-led growth supported by channel expansion Strong beat on earnings
* Fujiyama Power Systems reported a strong quarter as EBITDA surged 2.2x YoY in 2QFY27. Growth was fueled by robust volume-led demand, aided by PM Surya Ghar Muft Bijli Yojana (PMSGMBY), expansion of its distribution network and improved aftersales capabilities.
* We expect Fujiyama to deliver strong earnings growth in 2HFY27 while sustaining margins, driven by continued channel expansion, deeper penetration across Southern and Northeastern markets, ramp-up of new facilities, and strong demand for rooftop solar solutions across both residential on-grid and off-grid segments.
* We maintain our FY27/FY28 EPS estimates and reiterate our BUY rating with a TP of INR500 (premised on 20x FY28E EPS).
Earnings fueled by volume-led growth
* Consol. revenue grew 2.3x YoY to INR13.1b (est. INR10b). Gross margins contracted 200bp YoY to 25% EBITDA grew 2.2x YoY to INR2.2b (est. INR1.9b). EBITDA margins contracted 100bp YoY to 17.1% (est. 19.0%)
* Adj. PAT grew 2.1x YoY to INR1.3b (est. INR1.1b).
* For 1HFY27, revenue/EBITDA/adj PAT grew 2.3x/2.3x/2.3x YoY to INR27b/INR5b/INR3b.
* Gross debt stood at INR8.5b vs. INR4.6b as of Mar’26. Net cash outflow was INR2.6b vs. INR1.5b as of Sep’25.
* NWC days improved to 59 from 83 as of FY26.
Key highlights from the management commentary
* Guidance: Management is confident of achieving its FY27 revenue growth guidance of ~70%, but has refrained from revising the guidance despite strong H1 performance, given uncertainties around ALMM List II implementation, DCR cell availability and clarity on PM Surya Ghar 2.0. The company will reassess its guidance after 3QFY27 results. Management reiterated its sustainable EBITDA margin guidance of 18–19%, supported by its integrated manufacturing capabilities and B2C business model
* Operational margin: 2QFY27 EBITDA margin declined to 17.1% from 18.9% in 1QFY27, despite stable gross margins, due to seasonal softness, lower fixed-cost absorption at new facilities and higher sales and distribution expenses towards brand-building. External procurement of tubular batteries also impacted margins.
* New opportunities: Fujiyama is exploring opportunities in battery energy storage systems (BESS), having installed a 5MW pilot project at Dadri and planning an additional 10MW installation at Ratlam. It is also evaluating sodium-ion and other advanced battery chemistries, alongside backward integration into ingots and wafers ahead of ALMM List III implementation in Jun’28. Further, the proposed PM Surya Ghar 2.0 scheme, which may include incentives for battery storage and generation-linked support, could accelerate demand for integrated solar-plus-storage solutions.
* Distribution Network: Fujiyama has a network of over 10,200 channel partners across 25+ states and UTs, with several relationships spanning 15–25 years. During 1HFY27, it added over 100 distributors and 1,000 dealers, with Odisha and Uttarakhand moving into the fully covered category. The company is further expanding its reach into underpenetrated states, particularly Tier-2/3 cities and rural markets, supported by over 1,000 in-house service engineers (from 650 as on Mar’26), strengthening dealer support, installation and after-sales service capabilities.
Valuation and view
* Fujiyama’s growth is supported by strong traction under the PMSGMBY scheme (10GW opportunity for 3.5m pending installations) and its in-house DCR manufacturing facility, enabling the company to effectively capture rising demand. Further, continued expansion of the distribution network is enhancing market penetration.
* We estimate a revenue/EBITDA/adj. PAT CAGR of 57%/57%/59% over FY26-28. We reiterate our BUY rating with a TP of INR500 (premised on 20x FY28E EPS).
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