Bernstein's Warning: Projected Decline in Waaree and Premier Energies Shares; New Targets of ₹1,902 and ₹693 Issued; Sector Crisis Anticipated Due to Increasing Supply and US Competition.
Foreign brokerage firm Bernstein has issued negative ratings for Waaree Energies and Premier Energies shares, delivering a significant blow to investors. The report assigns these companies an 'Underperform' rating, indicating a potential decline in their share prices. Bernstein has set a target price of ₹1,902 for Waaree Energies and ₹693 for Premier Energies, representing a 21% and 26% decrease from their current prices, respectively.
India's Solar Sector Growth, Yet Mounting Concerns
India's solar sector is experiencing rapid growth, and the government is planning to further boost the industry with a $20 billion (₹1.67 lakh crore) investment. However, Bernstein analysts believe the sector faces several risks that could impact the companies' future. The report highlights that domestically manufactured solar products are priced 2-3 times higher than international prices, potentially weakening their competitiveness.
Anticipated Decline in the Solar Industry
Bernstein analysts Nikhil Nigania and Aman Jain suggest the solar industry is currently at its peak cycle and may experience a downturn in the future. While companies are currently experiencing healthy profits, they believe the situation may change after FY27, as new production units commence operations, leading to increased market supply.
Challenges Facing Waaree and Premier
Bernstein's report indicates that India may experience a surplus of solar modules in the coming years, exceeding demand. While the country's demand for solar modules is projected to reach 40 GW by FY26, domestic production capacity has already surpassed 70 GW, with several new production units set to launch soon. Furthermore, considering the rise in solar exports to the US market, Bernstein believes this trend may not be sustainable, potentially creating difficulties for Waaree and Premier Energies.
Competition from Giants like Reliance and Adani: Can Waaree and Premier Survive?
Bernstein predicts that larger companies like Reliance and Adani Enterprises will dominate Indian solar exports in the future. These companies possess ber financial capabilities and are better equipped to handle large-scale competition. While Waaree Energies might offer some competition, analysts believe their growth could be limited in the face of these larger players.
30-Year Warranty Concerns
Bernstein also expresses concern about Waaree and Premier Energies offering a 30-year performance warranty, questioning their credibility given the lack of long-term product testing. This poses a risk to investors, particularly if the companies fail to honor this warranty in the future.
