Kotak Institutional Equities has reiterated its bullish stance on Acme Solar Holdings (ACMESOLA), assigning a “BUY” call with an upgraded fair value of Rs350 per share. The research house believes Acme Solar is set to deliver robust and sustainable returns, fueled by a quantum leap in operational solar and hybrid capacities, improved execution in energy storage, and a deep forward pipeline. Acme Solar Holdings has emerged as a sector outperformer, leveraging capacity expansion and operational excellence to post a record 1QFY26 EBITDA of Rs4.6 billion—a 68% year-on-year surge. The company doubled its operational capacity to 2,890 MW and secured an additional 4,080 MW plus 550 MWh of battery energy storage in its commissioning pipeline.

With a strong pipeline, cutting-edge implementation of hybrid and storage projects, and sharply improving earnings, Acme Solar’s valuation multiples are expected to compress further even as growth accelerates. Kotak Institutional Equities projects the company’s fair value at Rs350 and maintains a “BUY” recommendation, citing strong execution, a robust asset base, and clear visibility into future capacity.

Spectacular Growth in Operational Metrics and Profitability

Acme Solar reported robust year-on-year growth across all important operating and financial benchmarks:

1QFY26 EBITDA soared to Rs4.6 billion (+68% yoy) on revenue of Rs5.1 billion (+65% yoy).

Operational capacity more than doubled to 2,890 MW, compared to 1,320 MW a year earlier.

EBITDA margin improved to 90% (from 88% in 1QFY25), showcasing high operational leverage.

Net profit before exceptionals reached Rs1.5 billion, a quantum leap from Rs14 million in 1QFY25.

The blended tariff dropped 20% yoy to Rs3.1/kWh due to commissioning of lower-tariff projects, particularly new assets in Rajasthan functioning at an impressive 30.3% PLF.

1QFY26 generation hit 1,636 million units (+107% yoy), reflecting effective capacity ramp-up and better plant load factors.

Net debt stood at Rs78 billion, rising modestly due to investments in new projects.

Unprecedented Expansion in Pipeline and Battery Storage

The company is accelerating its transition towards hybrid renewables and energy storage at scale, positioning itself as an innovator in the sector:

As of June 2025, operational solar capacity reached 2,890 MW.

Acme commissioned 350 MW projects in 1QFY26, including its first wind project (50 MW), marking entry into renewable hybrids.

The forward pipeline includes 2,240 MW of PPA-signed under-construction projects and 1,840 MW of additional wins—pending PPA closure.

The company clinched landmark battery energy storage system (BESS) deals: most notably, a 275 MW/550 MWh standalone contract with NHPC at a blended tariff of Rs0.2 million/MW/month, with 3.1 GWh of BESS ordered from global suppliers.

Incremental growth beyond FY28 is set to be anchored by 1.2 GW of upcoming projects.

Financial Forecast: Surging Margins, Expansion-Driven Earnings

Acme’s financials are poised for a sharp upward trajectory, driven by elevated scale, cost discipline, and ancillary revenue from battery storage:

Earnings are forecast to grow at a 70% CAGR through FY28, with EBITDA margins consistently north of 88% and RoE sharply improving as the asset base expands.

Strategic Execution: Project Wins, Tariffs, and Sector Trends

The company’s project execution and deal-making remain impressive:

Successful commission of new projects and PPA signings for 550 MW during the quarter.

Latest BESS projects to add incremental EBITDA of Rs600-650 million annually starting FY27, at 16% equity IRR.

The tariff environment reflects a bifurcation: new contracts struck between Rs2.52 and Rs4.73 per kWh, increasingly with leading government utilities (NHPC, NTPC, SJVN, SECI, GUVNL).

Kotak expects the competitive hybrid and storage market to sustain double-digit return on capital in the steady state (CRoGCI of 14-15%).

Balance Sheet and Leverage: Funding the Growth Engine

Acme Solar’s capital structure is geared to support ambitious capital expenditure, while manageable leverage ensures strategic flexibility:

Net debt increased to Rs78 billion as of June 2025, primarily due to ongoing project investments.

Gross block surged from Rs141 billion in March 2025 to Rs153 billion in June 2025, reflecting a capital cost of Rs33 million per MW.

The company maintains a comfortable net debt to EBITDA ratio—expected to decline as earnings ramp up.

Book value per share steadily climbs, signifying growing intrinsic worth.

Investor Takeaways: Valuation, Risks, and Tactical Considerations

With a new fair value of Rs350, Kotak Institutional Equities signals that Acme Solar offers an attractive risk-reward for medium-term investors.

At the current price of Rs294, there’s a potential upside of over 19% to the target.

The company trades at 8.6x EV/EBITDA on FY28 estimates, already reflecting some of the sector’s premium but justified by visible earnings and growth.

Risks to the thesis include execution delays, margin compression in the EPC business, and regulatory overhang on tariff and PPA realization.

Acme’s execution on hybrid and storage assets, PPA closures, and capacity addition should be closely monitored as catalysts for rerating.