Buy Fujiyama Power Systems Ltd for the Target Rs 600 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 2.4x YoY in 1QFY27. Growth was fueled by robust volume-led demand, aided by PM Surya Ghar Muft Bijli Yojana (PMSGMBY), expansion of its distribution network (covered Orissa and Uttarakhand) and improved aftersales capabilities. Profitability also benefited from backward integration (80% capacity utilization in solar cells), better operating leverage, and high traction under the PMSGMBY.
* We expect Fujiyama to deliver ~70% revenue growth in FY27 (vs. previous guidance of 50% growth) 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.
* Factoring in the strong 1QFY27 performance and improved management guidance, we raise FY27/FY28 EPS estimates by 8%/5% and reiterate our BUY rating with a TP of INR600 (premised on 25x FY28E EPS).
Earnings growth driven by revenue momentum and margin expansion
* Consolidated revenue grew 2.2x YoY to INR13.5b (est. INR9.3b). ? EBITDA grew 2.4x YoY to INR2.5b (est. INR1.8b). EBITDA margin expanded 120bp YoY to 18.9% (est. 19.5%), supported by a reduction in employee expenses (down 1pp YoY) and other expenses (down 90bp YoY). This was partially offset by a reduction in gross margins (down 80bp YoY).
* Adj. PAT grew 2.5x YoY to INR1.7b (est. INR1.1b).
* In May’26, a major fire at Fujiyama’s Bawal plant damaged assets worth INR1.4b. The assets are insured, and an insurance claim has been filed, with the assessment underway. The entire loss has been recognized under exceptional items; management expects recovery through insurance.
Valuation and view
* Fujiyama’s growth is supported by strong traction under the PMSGMBY scheme (15GW opportunity for 5m pending installations) and its in-house DCR manufacturing facility, enabling the company to effectively capture rising demand. Backward integration is aiding margin expansion, while continued expansion of the distribution network is enhancing market penetration.
* We estimate a revenue/EBITDA/adj. PAT CAGR of 51%/55%/57% over FY26-28. We reiterate our BUY rating with a TP of INR600 (premised on 25x FY28E EPS)
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