Tata Power, Waaree and Premier: Bernstein Cautions Investors About 2 Stocks and Sees Growth in Another
Solar stocks have given investors a lot to think about this year. Money kept flowing in whenever a company talked about new capacity, and prices swung a fair bit along the way. Things feel calmer now, and the talk has moved from who is growing fastest to who can actually deliver on time. A fresh Bernstein report on Indian industrials and infrastructure looks at exactly this.
Why Solar Makers Now Trade Near Each Other
Bernstein says the valuation gap across Indian solar makers has mostly shut over the past year. Earlier, large and small players were priced very differently. Now the market treats most of them alike, as long as they have solar cell lines running or about to start.
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Quick note on cells. A solar cell is the small part that turns sunlight into power, and a module is the finished panel made by joining many cells. Companies that make their own cells get a better value than those that only assemble modules.
Waaree Energies and Premier Energies, both covered by Bernstein, saw their valuations correct. Bernstein liked Premier's execution visibility, since its plant is already in the trial phase, meaning test runs are on before full production.
Against global peers, Indian names still look pricey. Bernstein uses EV/GW here, which is the company's value, debt included, divided by its capacity in gigawatts. Chinese makers trade at a small fraction of Indian ones because China has too much supply. Some are valued below what it would cost to build a similar plant in India. Even First Solar and Canadian Solar trade lower. Module-only players without cell lines still sit at a discount, and Bernstein isn't sure they can build cell plants in time to enjoy today's margins.
Where The Targets Leave Room
This is the part investors will care about most. Bernstein's target for Tata Power is ₹430, worked out by valuing each business separately and adding them up. Regulated generation, transmission and distribution assets get 3 times FY27 book value, which is just the value of the assets on the company's books. With the stock at ₹351, that target leaves about 22% upside. That's our own calculation, not something the report states.
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Waaree Energies has a target of ₹2,539, based on 10 times FY28 EV/EBITDA. That's a way of comparing a company's value to its operating profit before some costs. Against the latest price of ₹2,399, the room is only around 6%, which isn't much for a stock this volatile.
Premier Energies gets ₹814 at 10.5 times FY28 EV/EBITDA, a slightly higher multiple for its lead in the trial phase. But the stock is at ₹868.85, so the target sits about 10% below the price, which means a downside of roughly 6%. Even with the execution edge, the market has already paid up for it.
What Could Go Right Or Wrong
For Waaree and Premier, the upside risks come mostly from policy and supply. If other companies' cell and module plants get delayed, because of equipment import problems or visa trouble for foreign technical experts, these two keep their pricing power. Early curbs on solar wafer imports would help, and so would an extension of the rooftop solar subsidy beyond FY27. Both could also gain by moving into battery storage.
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Tata Power has its own worries. The long-pending Mundra power purchase agreement with states is still unresolved, and even if it's settled, adjusting coal mine profits against tariffs could hurt. A slowdown in rooftop solar, land and grid delays, and falling battery prices that make long deals for its pumped hydro projects harder are other risks. Bernstein also flagged faster margin pressure in its panel making business if supply keeps piling up.