Renewable Energy Sector Analysis and Stock Recommendations
Introduction
- India to add 517 GW of power capacity by 2032
- Renewable energy capacity to be around 375 GW
- Significant capex investment expected in renewable energy over the next 8 years
- Analysis of three stocks from hydro, wind, and solar sectors
Stock 1: SJVN (Hydro Sector)
Overview
- SJVN stock has seen a significant rally from ₹40 (June 2023) to ₹130
- Fiscal year 2024 marked a rally due to several reasons
Reasons for Rally
- Future Projections:
- By 2040, SJVN plans to add 50 GW of capacity
- By 2030, an additional 25 GW of capacity expected
- Capex Plans:
- 17,000 crores planned for capex by 2030
- Most of the capex will be funded through debt
Company Portfolio
- Current hydro projects dominant
- Future split: Hydro (56%), Solar (40%), Thermal (4%), and minor Wind
Government Involvement
- SJVN designated as Renewable Energy Implementation Agency
- Estimated additional 4,000 crores profit by 2030
Current Projects
- Operational: 2.3 GW
- Under construction: 4.9 GW
- Solar: 2 GW
- Hydro: 1.5 GW
- Thermal: 1.3 GW
Technical Analysis
- Stock has strong support at 123-124 levels
- PE Ratio: 61 vs industry PE of 37 (trading at high valuations)
Risks
- Government holds 81% stake; potential for stake dilution (Offer for Sale)
Stock 2: Inox Wind Limited (Wind Sector)
Overview
- Inox Wind Limited and Inox Wind Energy Limited are planning a merger
- Swap ratio changed due to bonus share announcement
Arbitrage Opportunity
- 158:10 swap adjusted to 632:10 after bonus shares
- Potential gain of 18,000 rupees (~25%) if merger occurs at current prices
Financial Analysis
- Historically loss-making but narrowing losses significantly
- FY 2024: Losses down to 49 crores from 689 crores
- Strong order book: 2.7 GW, net addition of 2.2 GW in FY 2024
Debt Situation
- Gross debt: 3,248 crores
- Net debt: 655 crores (excluding promoter debt and supplier credit)
Promoter Activity
- Promoter holding has been reducing
Red Flags
- Promoters issued bonus shares and sold large quantities shortly after
Stock 3: Sterling and Wilson Renewable Energy Limited (Solar Sector)
Overview
- Stock has given 145% returns in the last year
- Recently seen correction; current price ~706 rupees
Company Profile
- Solar EPC company with a portfolio of around 18 GW
- Reliance acquired a 40% stake in 2022, reduced to 32% by 2024
Financial Position
- Historically loss-making, improvement by 2024
- Net debt reduced to 116 crores
- Unexecuted order value: 8,000 crores
- Revenue up by 51% in FY 2024
Market Activity
- Promoters pledged 4.12% of stakes in June 2024, leading to stock correction
Promoter Holdings
- Significant reduction in promoter stake over the years
Conclusion
- SJVN has promising future projections but risks of government stake dilution
- Inox Wind offers arbitrage opportunities, but promoter activities raise concerns
- Sterling and Wilson has potential but promoter pledges are a significant red flag
Note: These analyses are provided for educational purposes and should not be taken as direct stock recommendations. Always conduct your own research before making investment decisions.