Motilal Oswal has initiated coverage of Waaree Energies Limited (WEL) with a strong Buy rating and a target price (TP) of Rs 4,000 per share. Positioned as a bellwether in India’s solar manufacturing sector, WEL commands significant market share with 5.4GW cell and 16.1GW module capacity domestically, alongside a 2.6GW plant in the US. The company is undertaking aggressive capacity expansions, targeting a 26.7GW integrated capacity by FY27, with estimated EBITDA and PAT CAGRs of 43% and 40%, respectively, through FY25-28. Diverse growth avenues like EPC, battery energy storage systems (BESS), inverters, and green hydrogen enhance its future outlook, mitigating margin pressures expected post-FY28. Key risks include execution challenges, policy shifts, and exposure to US trade uncertainties. Overall, WEL offers an attractive investment opportunity centered on India’s accelerating solar scale-up and global supply chain reshaping.

Buy Recommendation and Valuation

The research firmly endorses Waaree Energies with a Buy rating and assigns a target price of Rs 4,000, representing approximately 19% upside from current levels. Valuation is derived via a sum-of-the-parts approach valuing domestic modules at 15x FY28 EBITDA, the US module business at 12x, and new business verticals at 11x. This premium reflects strong near-term margins, healthy order flow, and growth visibility from India’s solar scale-up and global clean energy trends.

Industry Leadership and Capacity Scale

Waaree commands India’s largest solar module capacity at 16.1GW with operations spread across five domestic plants. Its cell manufacturing facility totals 5.4GW with expansions underway supported by government incentives. The US plant capacity of 2.6GW is slated to grow to 4.2GW by FY26 to support demand from data centers and manufacturing re-shoring. By FY27, the integrated capacity target is 26.7GW for modules, 15.4GW for cells, and 10GW for ingots and wafers, reflecting a formidable expansion roadmap.

Financial Outlook and Growth Trajectory

Revenue is forecasted to advance from Rs 264.5 billion in FY26 to Rs 388 billion by FY28, propelled by capacity expansions and product diversification. EBITDA is projected to surge from Rs 59.6 billion to Rs 80.3 billion over the same period, yielding a 43% CAGR. PAT similarly shows a robust CAGR of 40%. EBITDA margins are expected to remain stable above 20% through FY28, buffered by strategic raw material cost management and operational efficiencies. The company plans to invest Rs 250 billion in capex over FY26-28, primarily funded through internal accruals, maintaining a largely net cash balance.

Stock Levels and Targets for Investors

Investors are advised to consider accumulation at or near support levels with a medium-term investment horizon targeting the Rs 4,000 mark as capacity and earnings scale.

Diversification into Adjacent Energy Verticals

Expansion is underway into clean energy adjacencies enhancing business resilience: - Battery Energy Storage Systems (BESS) facility ramping from 3.5 GWh to 20 GWh capacity by FY27 with a capex of Rs 20.7 billion. - Inverter manufacturing scaling to 4GW capacity with ongoing investment. - Green hydrogen electrolyser manufacturing reaching 300MW capacity by FY27, supported by Rs 5.5 billion investment. These initiatives are expected to contribute 15% of EBITDA by FY28, broadening revenue streams beyond solar modules and cells.

US Market Expansion

The US solar market is critical in WEL’s growth strategy, with planned module capacity expansion from 2.6GW to 4.2GW by FY26. This expansion targets growing demand from burgeoning AI data centers, US manufacturing re-shoring, and electrification of transport. While the US market offers growth, it also exposes the company to geopolitical and policy risks related to trade tariffs and subsidy environments.

Risks and Challenges

- Execution risks accompany the capital-intensive capacity expansions across multiple segments. - Intensifying competition from large Indian conglomerates may compress margins. - Regulatory and tariff uncertainties, especially under US policy frameworks, could impact profitability. - Dependency on imported raw materials such as polysilicon presents margin risk. - The company’s comprehensive warranty obligations impose potential long-term liabilities. - Geopolitical and foreign exchange volatility could affect financial stability.

Conclusion

Waaree Energies stands as a formidable leader in India’s solar manufacturing ecosystem with aggressive capacity expansion plans, diverse product offerings, and robust financial projections. The Buy rating at a Rs 4,000 target price reflects confidence in its ability to leverage India’s solar growth momentum and global clean energy trends.