Best Solar Stock: Waaree Energies vs Premier Energies

India is on the path to becoming a global energy powerhouse, driven by its vast population and development potential, while prioritising sustainability.

With renewable sources projected to account for over 90% of global electricity generation growth by 2025, India has ambitious goals, including net-zero carbon emissions by 2070 and 50% of its electricity sourced from renewables by 2030.

The solar sector is set to thrive, with expectations of reaching approximately US$ 238 billion (bn) by 2030 and solar photovoltaic capacity potentially tripling by 2027.

Recent government initiatives aim for 500 GW of clean energy by 2030, with solar contributing 300 GW. This includes a plan to hold annual auctions for 50 GW of renewable energy capacity, primarily solar, indicating a major push for clean energy infrastructure.

As solar tariffs have declined, making solar energy more competitive than thermal power, the potential for solar energy in India is immense, supported by favourable policies and abundant sunlight.

By leveraging its solar potential of 748 GWp, India is not only enhancing energy security but also ensuring sustainable growth, with installed solar capacity expected to reach nearly 200 GW by FY2028.

This thriving market is attracting significant investment, with both domestic manufacturing and international supply chains undergoing a major transformation.

Bearing this in mind, we delve deeper into this booming industry with an in-depth comparison between two prominent players: Waaree Energies and Premier Energies.

Background

Waaree Energies

Waaree Energies Limited (WEL), established in 2007, has grown to be India's top manufacturer of solar PV modules, boasting the largest aggregate installed capacity of 12 GW as of 30 June 2024.

By FY24, it secured the second-highest operating income among domestic solar PV manufacturers. Waaree delivers quality and cost-effective solar solutions to promote sustainable energy and help reduce carbon emissions.

The company's rapid growth is evident from its capacity expansion-from 4 GW in FY22 to 12 GW by mid-2024. It didn't stop there; after June 2024, Waaree commissioned an additional 1.3 GW facility in Noida through its subsidiary, Indosolar Limited.

Waaree offers a diverse range of solar PV modules, including multicrystalline, monocrystalline, and advanced TopCon modules. The product portfolio also includes flexible modules, bifacial modules, and building-integrated photovoltaic (BIPV) modules.

Spread across five manufacturing facilities covering 143 acres in Gujarat and Uttar Pradesh, Waaree serves various markets through direct sales, exports, and a robust franchise network focused on rooftop and MSME projects.

It also provides EPC services, O&M, and generates revenue from ancillary products and renewable electricity, reinforcing its role as a comprehensive solar solutions provider.

Premier Energies

Premier Energies, a key player in India's solar sector, has built 29 years of experience into becoming more than just a manufacturer-it's a one-stop shop for solar solutions.

The company produces high-efficiency solar cells, including bifacial monocrystalline PERC cells, and a range of solar modules (monofacial and bifacial) in different sizes and power outputs, customized for specific projects as needed.

It extends its expertise to EPC (Engineering, Procurement, and Construction) services, managing everything from design to commissioning for ground-mounted, rooftop, and floating solar installations.

The company also provides ongoing operation & maintenance (O&M) services for its projects and even operates a 2 MW solar power plant for clean energy generation.

Their five manufacturing units in Hyderabad together support 2 GW of solar cell capacity and 4.13 GW for modules. Unit II stands out with India's first LEED Gold certification for sustainable manufacturing.

With major clients like NTPC, Tata Power, and Panasonic, Premier Energies has a solid foothold, backed by an impressive order book exceeding Rs 59,265 million (m). Combining manufacturing, EPC, O&M, and energy production, Premier Energies is well-positioned to ride India's solar growth wave.

Waaree Energies vs Premier Energies

Feature	Waaree Energies	Premier Energies
Core Business	Manufacturing, EPC, and distribution	End-to-end solar solutions
Market Position	Market leader in India	Emerging player with strong growth potential
Focus	Domestic market with international expansion	Both domestic and international markets
Market Cap (Rs Bn)	833	489

Source: Company Reports, Equitymaster

Revenue Growth

Waaree Energies vs Premier Energies Revenue Growth (2021-2024)

	2020	2021	2022	2023	2024
Revenue (Rs m)
Waaree Energies	20,213	19,830	29,459	68,627	1,16,328
Premier Energies	NA	7,362	7,670	14,632	31,713
Revenue growth YOY%
Waaree Energies		-1.9%	48.6%	133.0%	69.5%
Premier Energies			4.2%	90.8%	116.7%

Source: Equitymaster

Between 2021-2024, Premier Energies has reported a 3-year compounded annual growth (CAGR) of 62.7% in revenue. Waaree Energies has surpassed Premier's revenue growth, reporting a 80.4% growth over the same period.

Premier Energies has boosted its revenue over the past five years by expanding its manufacturing capacity and diversifying its offerings, including EPC and O&M services, to tap into growing demand.

Technological advancements like bifacial PERC and TOPCon modules have strengthened its competitive edge, attracting more customers and contracts.

Waaree Energies has seen substantial revenue growth due to aggressive capacity expansion, going from 4 GW in 2022 to 12 GW by mid-2024, and launching new facilities like its Noida plant.

Its wide product portfolio and strong international sales presence, coupled with government incentives, have reinforced its market leadership and revenue gains.

Profitability

EBITDA margin is a profitability ratio, which estimates the company's operating profits with respect to the percentage of its overall revenues. The EBITDA margin highlights the earnings of the company (prior to accounting for interest and taxes) on each rupee of sales.

Waaree Energies vs Premier Energies Operating Margins (2021-2024)

	2021	2022	2023	2024
Operating Profit %
Waaree Energies	6.4	7.1	14.0	15.9
Premier Energies	12.6	7.2	7.9	16.1

Source: Equitymaster

Waaree Energies has demonstrated significant improvement in its operating profit margin. This growth suggests that the company has effectively managed its costs and improved its operational efficiencies, particularly notable in 2023, where it jumped to 13.99%.

Waaree Energies Limited's focus on continuous efficiency improvements, improved productivity, and cost rationalisation has enabled it to deliver consistent financial performance.

The consistent upward trajectory indicates Waaree Energies Limited's strategic initiatives to enhance profitability, likely fueled by increased production capacity and market demand.

On the other hand, Premier Energies experienced a decline in its operating profit margin from 12.61% in 2021 to 7.90% in 2023, before rebounding to 16.07% in 2024. However, it has been consistently rising since 2022.

Expansion Plans

Waaree Energies and Premier Energies are both enhancing their capacities.

Waaree Energies Limited is gearing up for significant expansion to meet rising demand and seize new market opportunities.

With an eye on the future, Waaree Energies Limited plans to establish a solar PV module manufacturing facility in Houston, Texas, initially set for 1.6 GW, with the potential to scale up to 3 GW by FY26 and 5 GW by FY27, depending on market conditions.

In India, Waaree Energies Limited aims to bolster its leadership in the utility and enterprise module sales market. As of 30 June 2024, the company boasted an impressive 12 GW of installed capacity, including a recently commissioned 1.3 GW facility at its Indosolar plant.

To further strengthen its production capabilities, Waaree Energies Limited is developing a fully integrated 6 GW facility that will produce ingots, wafers, solar cells, and PV modules, slated to begin operations in FY27.

Waaree Energies Limited's expansion into the American manufacturing landscape positions it strategically to tap into the US Inflation Reduction Act's clean energy funding. The company is also exploring partnerships with local suppliers for solar cells in the US market.

Additionally, Waaree Energies Limited is considering establishing a future 5 GW solar cell manufacturing facility in the US to capitalise on available credits, ensuring its resilience against potential tariffs and reinforcing its foothold in a key market.

Premier Energies is also ramping up its game in the solar space with aggressive expansion plans. By FY25, it aims to boost its solar cell capacity with a 1,000 MW TOPCon line at Unit II, backed by Rs 6,694 m in funding from IREDA. This will supplement its existing 2 GW cell and 4.13 GW module capacities.

Premier Energies is eyeing a new facility to house 4 GW TOPCon solar cell and module lines, financed partly by proceeds from its fresh issue of shares.

To further secure its supply chain and cut costs, the company plans to extend backward integration by producing ingots and wafers, which will be used in-house and sold externally.

This strategic shift not only enhances operational resilience but also aligns with its push for efficiency gains through TOPCon technology, boasting up to 25.2% efficiency.

Premier Energies is transitioning from polycrystalline to monocrystalline cells and automating its production processes. To minimise supplier risks, it's sourcing equipment from Europe, setting itself up as a robust, integrated player ready to ride the clean energy wave.

Debt to Equity

This ratio measures the level of debt a company takes on to finance its operations or expansion, against the level of equity that is available.

Generally, a favorable debt-to-equity ratio is less than 1.0, while a risky debt-to-equity ratio is higher than 2.0.

Waaree Energies vs Premier Energies Debt to Equity Ratio (2021-2024)

	2021	2022	2023	2024
Debt to Equity
Waaree Energies	1.0	0.9	0.5	0.2
Premier Energies	1.6	2.8	3.9	2.2

Source: Equitymaster

While Waaree Energies enjoys a relatively low debt-equity, Premier Energies has borrowed money to fund its massive expansion in the past decade. However, the company has repaid a large part of its since its listing.

Dividend

The dividend is the income an investor can make from stocks, other than the appreciation in the value of the share. Owing to the capital-intensive nature of the business, neither company distributes dividends to investors.

Return on Capital Employed (ROCE)

Return on capital employed is one of the most meaningful indicators of a company's profitability and efficiency.

An excellent tool for analysing returns of a capital-intensive industry, it tells you the kind of money a company can generate on the total capital invested (shareholders equity plus borrowed money).

Waaree Energies vs Premier Energies Return on Capital Employed (2021-2024)

	2021	2022	2023	2024
Return on capital employed (in %)
Waaree Energies	17.2	21.1	43.4	49.1
Premier Energies	13.6	3.9	6.0	25.5

Source: Equitymaster

Waaree Energies' returns have been growing steadily. Premier Energies' returns fell in FY22 but have grown steadily since then.

Valuation

The most common and effective ratios for comparative analysis and valuation is the Price to Earnings (PE). PE ratio tells us how much shareholders are paying for one rupee of earnings.

Waaree Energies vs Premier Energies Valuation Ratios

	P/E Ratio
Waaree Energies	84.4
Premier Energies	212

Source: Equitymaster

The PE for Waaree Energies is at 84.4x.

For Premier Energies, the PE stood at 212x.

Bright Prospects

India's solar energy sector is experiencing a rapid transformation, driven by favorable government policies, declining costs, and increasing environmental concerns.

The government's ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030, with solar power playing a significant role, is propelling the industry forward.

The Production Linked Incentive (PLI) scheme has been instrumental in boosting domestic manufacturing capabilities. With a substantial investment of Rs 240 bn, this scheme is encouraging companies to set up large-scale solar module manufacturing facilities in India.

As a result, the country is witnessing a surge in domestic manufacturing capacity, reducing reliance on imports and creating job opportunities.

The solar park initiative, aimed at establishing large-scale solar parks across the country, is another key driver of growth. These parks offer several advantages, including economies of scale, streamlined land acquisition, and access to grid infrastructure.

The declining cost of solar modules, coupled with technological advancements, is making solar power increasingly affordable. The efficiency of solar modules has improved significantly over the years, leading to higher energy output and lower levelized cost of electricity (LCOE).

As a result, solar power is becoming a competitive and attractive option for both residential and commercial consumers.

India's solar power market is projected to grow exponentially in the coming years. According to industry estimates, the country is expected to add 175-180 GW of solar capacity between 2025 and 2030. This growth will be driven by factors such as increasing demand from various sectors, supportive government policies, and declining costs.

The domestic manufacturing ecosystem is also witnessing significant growth. The PLI scheme has incentivised companies to invest in advanced manufacturing technologies, such as PERC and TOPCon, which offer higher efficiency and lower production costs.

As a result, India is emerging as a global manufacturing hub for solar modules.

While China has traditionally dominated the global solar manufacturing landscape, India is gradually gaining ground. With supportive policies, increasing investments, and a strong focus on technological advancements, India is well-positioned to become a major player in the global solar energy market.

Waaree Energies or Premier Energies: Which is Better?

With an impressive revenue growth rate of 80.4% between 2021 and 2024, Waaree has effectively harnessed government incentives and established a solid international market presence to reinforce its leadership position.

Meanwhile, Premier Energies has recorded a respectable three-year compound annual growth rate (CAGR) of 62.7%, though it faces challenges in sustaining its operating margins, highlighting the need for further profitability improvements.

Both companies boast strong financial health, yet their debt profiles tell a different story. Waaree Energies benefits from a low debt-to-equity ratio of 0.21, while Premier Energies carries a higher ratio of 2.17, reflecting its aggressive growth strategy.

Waaree's impressive return on capital employed (ROCE) at 49.05% signals effective operational management, whereas Premier Energies is on a positive trajectory with a ROCE of 25.54%.

Neither company currently pays dividends, given the capital-intensive nature of their operations, but both are well-positioned to seize opportunities in the expanding solar market.

Still Wondering Which is Better?

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For a more detailed analysis, check out the Waaree Energies factsheet and Premier Energies factsheet.

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