Waaree Energies earnings: A reality check as listing euphoria fades

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Subscribe to enjoy similar stories. The half-year ended (H1FY25) earnings of recently listed Waaree Energies Ltd, the largest solar module manufacturer in India, came as a rude shock to investors. The stock fell 10.5% since results were announced on 18 November.

Its maiden result, post listing, showed that in H1FY25, consolidated revenue grew a mere 2% year-on-year to ₹6,983 crore, hurt by lower export volumes. In the earnings call, the management said export realization fell from 28-30 cents per watt-peak (Wp) a year ago to 24 cents in H1FY25, while the same in the domestic market fell from 21 cents to 17 cents. Considering that price realization fell by about 20% and sales still grew 2% year-on-year in this span, sales volume growth must have been about 22%.

In the case of Waaree, sales in value terms may not be a critical metric because the selling price of solar modules or finished goods fluctuates in tandem with the procurement price of solar cells, a key raw material. Therefore, sales volume and gross margin are better indicators of earnings performance. Gross margin saw a sharp year-on-year improvement of 390 basis points to 25.3% as raw material cost or the cost of solar cells eased.

However, gross margin gains got significantly diluted at Ebitda level as Ebitda margin expansion was restricted to 110 bps to 15.4%, adversely impacted by the rise in staff costs and selling overheads. The management anticipates a bump-up of about 200-300 bps in Ebitda margin once their backward integration plan of solar cell manufacturing fructifies. Their 5.4 GW solar cell manufacturing unit is likely to be fully operational by the end of FY25.