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Capacity ramp-up remains the key earnings driver

* Premier Energies (PEL)’s 2Q in line: PEL reported an in-line consolidated revenue/EBITDA at INR26.3b/INR7.4b, with an EBITDA margin of 28%. APAT was also in line at INR4.6b. Module/cell production for the quarter was 1.2GW/0.92GW with a CUF of 55%/99%.

* Key things we liked about the result:

1) strong order inflows, with new orders of ~INR40b taking the total order book to INR163b, with deliveries over 12–14months, providing strong revenue visibility

2) commissioning of the 7GW cell plant remains on track, with ALMM-II inspection expected in the third week of November’26 and commercial production expected to begin in Nov’26

3) The company continues to maintain industry-leading cell utilization, with cell CUF at 99%

4) BESS Phase 1 (6GWh) targeted for 2QFY28, with 40% localization comfortably achievable.

* Key monitorables:

1) Timely ramp-up of the upcoming 7GW cell manufacturing capacity, with the earlier CUF target of ~50–60% by Nov’26 revised to 25–30% by Dec’26, while the ~70% CUF target by Mar’27 remains unchanged

2) Progress on US cell manufacturing plans, with PEL at an advanced stage of finalizing the factory location with its JV partner and expects finalization over the next 12–18 months.

Highlights of 2QFY27 performance

* Solar manufacturing reported an EBITDA/PAT margin of 29.3%/17.9%.

* The 7GW TOPCon cell plant at Naidupeta was commissioned, with commercial production commencing in Nov’26. CUF is guided at 25–30% by Dec’26 and ~70% by Mar’27.

* Total solar order book stood at INR162.6b (~10GW), following fresh 2Q orders of INR40.0b, with execution scheduled over 12–14 months. Retail accounts for ~35–40% of the order book.

* Blended DCR module realizations stood at INR21.5–22/Wp, with retail at INR23– 24/Wp, C&I at INR21–21.5/Wp and IPP at INR20–20.5/Wp.

* Non-DCR module realizations stood at INR12.75–13/Wp, generating single-digit EBITDA margins.

* The Transcon transformer business reported a 2Q revenue of INR1.22b, PAT of INR180m and an order book of INR3.3b; revenues are expected to more than treble over the next three years.

* The Ingot-wafer facility is progressing as planned, with Phase 1 (5GW) targeted for Dec’27 and Phase 2 (5GW) by Jun’28. The project has secured 169 acres of land along with power and water approvals.

* FY27 capex is guided at INR24b, with H2 capex of ~INR7b.

* Valuation and view: We value the domestic module business at 13x FY28E EBITDA and the new business segment at 10x FY28E EBITDA. The sum of these segment valuations (adjusting for net debt) results in a TP of INR1,150/share. Reiterate BUY.

* The valuation of PEL has been derived through a sum-of-the-parts (SoTP) methodology: the domestic module business is valued at 13x FY28E EBITDA. The new business segment, is valued at 10x FY28E EBITDA, consistent with domestic peer valuations. The sum of these segment valuations (adjusting for net debt) results in a TP of INR1,150/share.

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