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Ramp-up of cell capacity remains key catalyst

* Weak 1Q hit by lower volumes: Saatvik Green Energy Limited’s (SGEL) 1QFY27 revenue stood at INR5,110m (-44% YoY, -68% QoQ), while EBITDA came in at INR338m (-81%YoY, -69% QoQ), with an EBITDA margin of 6.6% (vs. 6.7%/19.3% in 4QFY26/1QFY26). The weak performance was driven by lower sales volumes as customers adopted a ‘wait-and-watch’ approach pending clarity on ALMM-II, with geopolitical and supply chain disruptions, commodity price volatility, elevated logistics costs, and foreign exchange fluctuations further weighing on performance.

* 2.4GW cell manufacturing capacity is progressing well and is nearing ramp-up. ALMM-II inspection is planned for Sep’26, with cell production expected to commence in 3QFY27 and ramp-up likely to reach ~80% utilization by 4QFY27.

* Key monitorables:

1) production ramp-up at the new 2.4GW cell capacity

2) new order momentum and pricing, both in the DCR and non-DCR segments

3) uplift in EBITDA margins as cell capacity ramps up

4) change in the order book mix in 2HFY27

5) revenue and EBITDA uptick from nonsolar businesses, which management intends to ramp up to 15% in FY28 (currently: 4-5%).

* Cut FY27/28 Adj. PAT by 34%/11%: Following weaker 1QFY27 performance and the guidance provided during the earnings call, we update our model and lower our FY27/28 module volume estimates by 5%/3% and cell volumes by 20%/2%. We also cut our DCR and non-DCR pricing assumptions to align with current trends. Consequently, we lower our FY27/28 adj. PAT estimates by 34%/11% . Overall, we expect 2QFY27 earnings to remain under pressure, although margins should improve substantially in 2HFY27. We conservatively build an 8% EBITDA margin for FY27 vs management’s guidance of 12%.

* Valuation:

* Following the revision in earnings (multiple unchanged at 8x FY28 EBITDA), our revised TP is INR508/sh, implying a 19% upside to the current price.

* We value SGEL at 8x FY28E EBITDA and adjusting for net debt, we derive a TP of INR508, implying an upside of 19%.

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