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Websol Energy System Limited delivered a mixed Q1 FY27, with revenue of Rs 373 crore (up 70.3% YoY) and EBITDA of Rs 126 crore (margin: 33.7%), as a sharp shift in product mix toward lower-margin modules drove a 1,360 bps YoY margin contraction even as absolute EBITDA grew 21.4%. The more consequential development this quarter came outside the P&L: on 4 August, the company prepaid the entire Rs 110 crore IREDA term loan from internal accruals, cutting the promoter pledge from 80% to 16%. Set against that, the 4 GW Phase 3 greenfield expansion has been relocated from Andhra Pradesh to West Bengal, with land approval still pending though management has guided to receiving it this month. Based on our revised estimates and valuing the company at 15x FY27E EPS of Rs 7.3, we arrive at a target price of Rs 110

Investment Rationale:

Financial & Operational Snapshot

• Performance: Revenue at Rs 373 Cr (up 70.3% YoY, down 7.0% QoQ), EBITDA at Rs 126 Cr (33.7% margin), PAT at Rs 78 Cr (20.6% margin).

• Balance Sheet: Net cash of Rs 34 Cr as at FY26-end (31 Mar 2026), Debt/Equity at 0.19x. Post quarter-end, the entire Rs 110 Cr IREDA term loan was prepaid from internal accruals. CRISIL rated BBB+/Stable, unchanged.

• Order Book: Rs 1,278 Cr ( 52% Cells / 48% Modules by underlying value), up 10% QoQ, providing ~1-year revenue visibility.

• Utilization: Cell line(s) at 92% (steady QoQ), Module line at 81% (up from 74% in Q4 FY26).

• Efficiency: Average cell efficiency holding at 23.3% (Mono PERC), TOPCon upgrade targeting ~25% efficiency by commissioning.

Strategic Expansion (TOPCon Upgrade & Phase 3 Relocation to West Bengal)

• TOPCon upgrade: Existing 600 MW Mono PERC line upgrading to 750 MW TOPCon at ~Rs 270 Cr capex, funded via internal accruals. Targeted completion March 2027, management guides to a 2-3 year payback.

• Phase 3 (greenfield, relocated): 4 GW integrated cell + module facility, to be executed in two 2 GW phases, now sited in West Bengal rather than the previously communicated Andhra Pradesh location. Capex for this project has not been redisclosed since the relocation.

• Status: Land shortlisted but approval still pending as of now, construction targeted to start mid-September 2026, ~9 months to complete, with equipment ordered around December 2026. Supply Chain & Market Dynamics

• Margin Outlook: Management guides to holding current (postmix-shift) margin levels.

• Inventory: Rose ~7% QoQ, attributed by management to monsoon-linked installation slowdowns (not customer liquidity stress, unlike some peers) and the timing lag between captive cell production and eventual module-stage revenue recognition, management expects this to normalise as the season turns.

• De-pledging: Substantially executed, the Rs 110 Cr IREDA facility that carried the promoter pledge was prepaid on 4 August 2026, cutting the pledge from 80% to 16% of promoter holdings

Valuation & Outlook

Until Phase 3 and Phase 4 move from land-approval and planning risk into visible, on ground execution construction actually underway on a confirmed site, a firm commercial-production date, and a capex/funding plan re-disclosed for the relocated project, we do not expect the market to pay up toward those peer multiples. The West Bengal relocation, however makes us question Phase 3's on-time delivery suggests the market will want to see execution before re-rating. Our target therefore reflects earnings growth (TOPCon ramp, utilisation, cell/module mix), on a broadly flat multiple, we would revisit once Phase 3 land approval, financial closure, and a firm COD are formally disclosed to the exchange. We value the company at ~15x FY27E EPS of Rs 7.3 (our estimate) and arrive at a target price of Rs 110.

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