Ambit Capital has released its latest analysis on key Indian renewable energy stocks, assigning 'Buy' ratings to Suzlon Energy Ltd and Saatvik Green Energy Ltd, while placing 'Sell' ratings on Emmvee Photovoltaic Power Ltd and Premier Energies Ltd. The brokerage also provided updated target prices for these companies, reflecting an evolving landscape in India's solar PV manufacturing sector.
Solar PV Sector at Inflection Point
According to Ambit Capital, India's solar PV manufacturing cycle is at an inflection point. The brokerage noted that cell oversupply in the sector has arrived sooner than anticipated, leading to a shift in profitability from modules to cells, and eventually towards ingot-wafer manufacturing.
The government's intent to localize the entire PV value chain is reinforced by the upcoming ALMM List III, effective June 2028. However, Ambit Capital cautions that low barriers to entry mean early movers may only enjoy supernormal returns until increased competition normalizes profitability.
Specific Ratings and Target Prices
- Suzlon Energy Ltd: Ambit Capital assigned a 'Buy' rating with a target price of Rs 59. However, the brokerage flagged slowing growth in wind capacity additions as a potential risk, which could impact Suzlon's order books.
- Saatvik Green Energy Ltd: Rated 'Buy' with a target price of Rs 480. Ambit noted Saatvik's FY28 P/E of 8x is justified until its cell line becomes stabilized and operational.
- Emmvee Photovoltaic Power Ltd: Received a 'Sell' rating, with a target price of Rs 333. The brokerage justified Emmvee's FY28 P/E of 14x given its lack of adjacencies and small cap.
- Premier Energies Ltd: Maintained a 'Sell' rating, with a target price of Rs 825. Ambit's DCF-based target implies a FY28 20x P/E for Premier, supported by its strong balance sheet, promoter experience, and high efficiencies.
Market Dynamics and Profitability Outlook
Ambit Capital's analysis indicates that India already possesses module capacity of approximately 230GW, significantly exceeding its estimated annual demand of 65-84GW over FY27-FY32. The deferral of ALMM-II for net-metering and open-access projects to December 31, 2026, further pushes out commercial and industrial (C&I) cell demand, even as supply continues to increase.
The brokerage expects the sector's Return on Invested Capital (RoIC) to decline from over 40 percent to 19-21 percent. This contraction is attributed to decreasing DCR-module spreads, rising working capital requirements, and accumulating replacement capital expenditure. Ambit highlights that the solar PV sector is currently exhibiting several peak-cycle markers, including record returns, capacity outpacing demand, low entry barriers, and increasing equity issuance.
While recent channel checks showed temporary tightness in solar cell supply, pushing prices higher, Ambit expects this tightness to ease and spreads to moderate following the ALMM extension. Backward integration, technology upgrades, and adjacencies will necessitate sustained capital expenditure, with excess supply and incremental investments likely to compress future returns.