Top 3 Solar Stocks to Benefit from ALMM

We recently wrote to you about a penny stock that rose 35% in the last five days on the back of positive developments in the solar sector.

In a big boost to domestic solar panel companies, the Ministry of New and Renewable Energy (MNRE) this week announced the reimposition of the Approved List of Models and Manufacturers (ALMM), effective from 1 April 2024.

This basically meant that solar rooftop and open access projects will have to procure modules from ALMM approved manufacturers.

On the back of this news, the stock rose 35%. It also hit its highest level in as many as 10 years. You can read the entire article here.

Now this is a big positive, not only for the above-mentioned company but for all solar module manufacturers enlisted under the ALMM.

The implementation of the ALMM is expected to help keep operating margins of domestic module makers strong at 12-14% in fiscal 2025, in line with the level likely this fiscal.

This fiscal, profitability is expected to almost double over the previous fiscal as rising share of exports, which fetch a 15-20% premium over domestic prices, will more than offset the surge in imports in the absence of ALMM.

Here are the top three that are expected to benefit from the list.

#1 Tata Power

First on our list is Tata Power, a subsidiary of the Tata Group.

Tata Power has a wholly owned subsidiary called Tata Power Solar which specialises in solar energy services. The company manufactures solar modules, solar cells, and other solar products, and provides EPC services for solar power projects.

It has an EPC portfolio of more than 12.8 GWp of ground-mount utility-scale, over 2 GW of rooftop and distributed ground-mounted systems, and over 2 GW of rooftop and distributed ground-mounted systems, and over one lakh solar water pumps.

It has also facilitated over Rs 35 bn of customer financing for solar projects during the last 4.5 years. The quantum of solar power financed includes 850 MW for non-residential and about 9 MW for residential customers.

The company recently commissioned a 100 MW solar PV project, coupled with 120 MWh utility scale battery energy storage systems (BESS), at Rajnandangaon in Chhattisgarh.

It secured this Rs 9.5 m project on EPC basis from the Solar Energy Corp. of India Ltd. (SECI) in December 2021.

The project is expected to generate 243.53 million units of energy annually and reduce carbon footprint by 4.87 million tonnes in 25 years.

Shares of Tata Power have risen more than 110% in the last year on the back of the company's growing role in the EV ecosystem. The increase in demand for power has also put the stock on the radar of investors.

The company's revenue has grown at a CAGR (compound annual growth rate) of 24% in the last 3 years while net profit has jumped over 130%.

It has a debt to equity ratio of 1.7x.

To know more about the company, check out its financial factsheet and latest financial results.

#2 BHEL

Second, on our list is BHEL.

The company is the flagship engineering and manufacturing company of India owned and controlled by the Govt. of India.

It has capabilities to manufacture the entire range of power plant equipment including thermal, gas, hydro and nuclear power projects.

Under its solar offerings, the company provides EPC solutions from concept to commissioning for grid connected, standalone solar PV applications including floating solar power plants and

mono-PERC Solar PV Modules up to 400 Wp.

Its solar portfolio stands at over 1.2GW. The company has also commissioned over 150 MW of

floating solar plants and has emerged as the leading player in floating solar segment in India.

In FY23, the company commissioned the largest floating solar power plant of India with 100 MW capacity at NTPC Ramagundam in Telangana.

Last year, it invited bids for the design, supply, and assembly of a floating system and associated anchoring and mooring to develop a 300 MW AC floating solar power project in Odisha.

The project will come up at Rengali Reservoir in the Angul district. The reservoir is owned by the Water Resources Department of Govt. of Odisha.

PV modules will be supplied by BHEL. The design life of the floating units (including anchoring and mooring) should be a minimum of 25 years.

BHEL shares have run up more than 200% in the last year. However, the company's revenue and net profit growth have been inconsistent.

It has a debt-to-equity ratio of 0.35x.

To know more about the company, check out the BHEL company fact sheet and quarterly results.

#3 Insolation Energy

Third, on our list is Insolation Energy.

The company is a one-stop shop for all solar-related needs. It boasts a lineup of premium, high-efficiency solar panels, alongside top-tier batteries and PC offerings.

Additionally, it offers integrated engineering, procurement, and commissioning services (EPC), along with a suite of Original Equipment Manufacturing (OEM) services.

The solar PV modules manufactured by the company use both polycrystalline and Mono-PERC crystalline cell technology.

Currently the company operates with a solar panel manufacturing capacity of 700 megawatts (MW), It is strategizing to elevate its capacity to 1200 MW, further solidifying its position in the market.

Insolation Energy has unveiled ambitious plans to significantly expand its manufacturing capacity in the coming years.

The company is ramping up for a massive solar power push. By 2024, it expects a 250 MW capacity hike with advanced G2G tech, reaching 1,000 MW overall and targeting Rs 6.3 bn in revenue. Its ambitions climb further: 1,200 MW capacity by 2025 with Rs 10 bn revenue, plus a 600 MW solar cell line.

By 2026, Insolation Energy envisions a giant 2,000 MW capacity, aiming for Rs 20 bn in revenue and 1,000MW in sales, with its cell unit contributing an additional 1,000 MW capacity.

Insolation Energy's shares have jumped over 10x in the last year. The stock has been a hot favourite of investors because of its strong fundamentals and growth plans.

Over the last five years, Insolation Energy has reported a 5-year CAGR of 38% in revenue driven by significant capacity expansion.

The company's debt to equity ratio also stands comfortable at 1x.

For more details, see the Insolation Energy company fact sheet and quarterly results.

Conclusion

As the world shifts towards renewable energy sources to combat climate change and reduce reliance on fossil fuels, solar energy emerges as a frontrunner in the transition.

The increasing adoption of solar power on a global scale, coupled with advancements in technology and supportive government policies, creates a favourable market landscape for investors.

By allocating capital to best solar energy stocks, investors not only stand to benefit from potential financial returns but also contribute to the broader goal of building a cleaner and more sustainable future.

However, like any investment, it's crucial to conduct thorough research, assess risk factors, and diversify portfolios to mitigate potential downsides. Despite the potential for long-term growth, prudent risk management is crucial.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...