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An integrated solar cell and module manufacturer ...

Premier Energies Ltd (PEL), established in 1995, is an integrated solar cell and module manufacturer based in Hyderabad, Telangana. With five facilities, they have an annual capacity of 2 GW for solar cells(~22% of revenue in FY24 ) and 4.13 GW for solar modules (64% revenue in FY24). In addition to producing solar cells and modules, the company also provides engineering, procurement, and construction solutions, offers operations and maintenance services, and operates as an independent power producer. Their clients include NTPC, Tata Power Solar Systems, Panasonic Life Solutions, Shakti Pumps, First Energy, and Luminous. 86% of the overall sales came from the domestic market, while the rest came from exports.

• Solar cell consumption in India increased from 8.9 GW in FY22 to ~22.1 GW in FY24 and is expected to reach 78 GW by FY28. The Indian solar module market grew over 35% from 21 GW to 28.3 GW in FY23-24 and is projected to grow at a 40% CAGR over the next five years.

• Premier Energies Limited (PEL) is India’s second-largest integrated solar cell and module manufacturer. As of July 31, 2024, PEL has a strong order book worth ?5,926.6cr, with 25% from public sector undertakings and the remainder from private players.

• PEL’s revenue grew at a 106% CAGR from FY22 to FY24, reaching ?3,143.8cr. By FY24, the company achieved a PAT of ?231.4cr and an EBITDA margin of 15%. For Q1FY25, revenue stood at ?1,657cr with net profit at ?198cr.

• PEL reported a PAT margin of 7.4%, a return on equity (RoE) of 35%, and a return on capital employed (RoCE) of 20% for FY24.

• PEL, the largest Indian solar cell exporter to the US, signed a Letter of Intent with Heliene USA Inc in February 2024 to form a joint venture for developing, constructing, and operating solar cell manufacturing facility in the US.

• In FY25, PEL plans to commission a new 1GW production line for solar cells in Unit II. As of March, PEL holds a 16.2% market share in India’s total solar cell-installed capacity.

• To extend backward integration, the company plans to produce wafers and ingots, crucial for cell manufacturing. This will enhance resilience against market and supply fluctuations and improve component traceability.

• With the launch of the Grid Connected Solar Rooftop Programme by the Govt., which aims to install solar systems in 10 million Indian homes, PEL plans to leverage their OEM status and extensive sales channels to meet this demand and boost brand recognition. Additionally, opportunities in the domestic market include Indian Railways’ initiative to electrify its tracks.

• At the upper price band of ?450, PEL is trading at a P/E ratio of 88x for FY24, which seems expensive. However, considering its extensive experience in module and cell manufacturing, backward integration strategies, export market exposure, and domestic manufacturing opportunities supported by various government policies and the China Plus One strategy, we assign a “Subscribe” rating for medium to long-term investment.

Purpose of IPO

The offering comprises a fresh issue of ?1,291.4cr and an Offer-for-Sale (OFS) of ?1,539cr. The primary goal is to invest ?968.6cr in Premier Energies Global Environment Pvt Ltd to establish a 4 GW Solar PV TOPCon Cell and Module facility in Hyderabad, Telangana, India

Key Risks

• ~67.03% of the company’s revenue relies on its top 10 customers.

• All manufacturing facilities are located in Hyderabad, Telangana.

• Nearly half (48.5%) of the company’s purchases are imported from China.

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SEBI Registration Number: INH200000345