Buy Premier Energies Ltd for the Target Rs 1,240 by Motilal Oswal Financial Services Ltd
Sustained margins and capacity expansion support outlook
* Premier Energies (PEL) reported a strong 1QFY27. Its revenue was 6% higher than estimated at INR24.6b. EBITDA stood at INR7.1b, beating our est. by 13% as the EBITDA margin was 29% (vs. est. of 27%). APAT beat our est. by 25% at INR4.6b, driven by lower-than-expected interest costs. Module/cell production was 953/844MW with a CUF of 63%/92% in 1Q.
* Key things we liked about the result:
1) EBITDA margins were sustained during the quarter at 29%, and the company maintains industry-leading cell utilization levels, with Cell CUF at 92%
2) 7GW cell plant commissioning remains on track with trial production expected in Aug’26; CUF targeted at ~50–60% from Nov’26 and 70% by 4QFY27
3) EBITDA margin guidance of 29-30% was maintained
4) PEL is in advanced stages of setting up a European office and building a dedicated sales team.
* Key monitorables:
1) Timely commissioning and ramp-up of upcoming 7GW cell manufacturing capacity
2) Progress on the US cell manufacturing JV, with location finalization underway and production expected to commence in 24–30 months
3) flow of new DCR orders amid partial extension of ALMM-II.
* Valuation & view:
We value the domestic module business at 14x FY28E EBITDA and the new business segment at 10x FY28E EBITDA. The sum of these segment valuations (adjusting for net debt) leads to our TP of INR1,240.
Highlights of the 1QFY27 performance
* The 5.1GW Seetharampur module plant is fully operational, while revenue contribution from the 7GW cell plant is expected to commence from Sep'26.
* The 1QFY27 capex stood at INR15b, while management ruled out near-term equity raising, with the recent cell and module expansion largely funded through equity.
* The company secured INR30.1b of new cell and module orders in 1QFY27, taking the order book to INR150b, with 40–45% executable in FY28.
* Management expects India's solar installations to reach 20–24GW (DC) over the next nine months, driven by PM Kusum and PM Suryaghar.
* Management reiterated its 29–30% EBITDA margin guidance, aided by strong FY27–28 demand, a favorable DCR mix, and ramp-up of the 7GW cell line.
* Management is accelerating its international expansion, with a US cell manufacturing JV progressing and a European sales platform under development.
Valuation and view
* The valuation of PEL has been derived through a sum-of-the-parts (SoTP) methodology: The domestic module business is valued at 14x 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) leads to our TP of INR1,240.
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