After a 66% Listing Surge, Waaree Energies’ Shares Dip 9%: Is It Time to Buy, Sell, or Hold?

Waaree Energies, one of India’s most prominent solar panel manufacturers, marked an impressive debut on the stock exchanges on October 28, 2024. The company listed at a significant premium, reflecting market confidence in its growth potential. But while the stock opened strong, it faced a subsequent dip as investors engaged in profit booking. With mixed opinions on its long-term outlook, this post takes a closer look at Waaree Energies’ performance, market positioning, and what investors should consider.

Waaree Energies: A Strong Start with Impressive Listing Gains

Waaree Energies’ shares began trading at a remarkable premium, exceeding expectations and marking one of the most anticipated listings in India’s renewable energy sector. On the Bombay Stock Exchange (BSE), the stock opened at Rs 2,550 per share, representing a 69.66% jump from its issue price. The price briefly climbed to Rs 2,600, securing a gain of nearly 73%. On the National Stock Exchange (NSE), the stock started at Rs 2,500, a 66.33% increase over the issue price, resulting in a market capitalization of nearly Rs 69,000 crore.

Despite the promising opening, Waaree Energies’ stock saw a drop shortly after. Profit booking pushed the share price down by 8% on the NSE to an intraday low of Rs 2,300. On the BSE, the stock fell nearly 10% to Rs 2,294.55. This swift pullback has left investors questioning whether they should hold onto Waaree for the long term or book profits now.

Market Experts Weigh In: Mixed Signals on Long-Term Potential

Investment experts offered varied perspectives on Waaree’s long-term viability. Narendra Solanki, Head of Fundamental Research at Anand Rathi Shares and Stock Brokers, suggested that investors maintain a long-term hold, citing Waaree’s strong positioning within the renewable energy market and government support for sustainable initiatives. According to Solanki, Waaree’s established legacy in the solar sector, combined with India’s renewable energy transition, could unlock additional growth.

Sagar Shetty, Research Analyst at StoxBox, emphasized the company’s robust international growth strategy, efficient supply chain management, and substantial order book as key strengths. He advised investors with an allocation to hold their positions, stating that Waaree’s strategic positioning supports sustainable growth and warrants a medium- to long-term outlook.

However, Prashanth Tapse, Senior Vice President of Research at Mehta Equities Ltd., presented a more cautious view. Tapse recommended that investors consider partial profit booking due to the stock’s sharp listing gains. He noted that the post-listing valuation appeared stretched, potentially overestimating the company’s medium-term growth prospects. Tapse's cautionary stance highlights the risks associated with elevated valuations after high-profile listings, where market sentiment can often inflate prices.

Grey Market Premium (GMP): Meeting Expectations, But Missing 100% Gains

Waaree Energies was expected to deliver over 100% gains according to its Grey Market Premium (GMP), yet it settled at a 70% premium upon listing. While this performance is still strong, it indicates some caution among investors. The GMP had created expectations of a higher opening, suggesting that the post-listing cooling was partly due to profit booking in response to unmet market anticipation.

Waaree Energies’ Business Fundamentals: A Strong Market Position in Renewable Energy

Waaree Energies has consistently strengthened its position as a leading player in India’s renewable energy market. The company has invested heavily in capacity expansion, backward integration, and targeted growth, establishing itself as a dominant force in the solar panel industry.

With about 70-80% of India’s rooftop solar installations being driven by the commercial and industrial sectors, Waaree’s focus on utility-scale solar installations offers significant growth potential. The company’s business model leverages open-access and group captive models, both of which cater to large-scale energy needs in sectors committed to reducing carbon emissions and managing energy costs efficiently.

Financial Performance: Strong Growth with Impressive Revenue and Profit Margins

Financially, Waaree Energies has demonstrated robust growth over recent years. From FY22 to FY24, the company’s revenue expanded at an exceptional compound annual growth rate (CAGR) of 99.8%. Profit after tax surged from Rs 79.6 crore in FY22 to Rs 1,274.3 crore in FY24, underscoring the company’s rapid financial ascendance. Meanwhile, return on equity (ROE) rose from 17.69% to 30.26%, reflecting Waaree’s ability to generate profits efficiently on shareholder equity.

Waaree's operational success is further underpinned by its Rs 3,600 crore Initial Public Offering (IPO), which included a fresh issue of equity shares and an Offer-for-Sale (OFS) by existing shareholders. The proceeds from the IPO are primarily earmarked for a new 6 GW manufacturing facility in Odisha, which will enhance Waaree’s production capabilities for ingots, wafers, solar cells, and photovoltaic (PV) modules. This move aligns with the company’s growth strategy of bolstering domestic manufacturing and securing its supply chain.

Renewable Energy Market Outlook: Government Support and Rising Demand

India’s renewable energy market is poised for growth, with strong government backing and an increasing focus on achieving energy independence through sustainable sources. Waaree Energies stands to benefit from this momentum, as its products align with national goals to expand solar capacity. Government initiatives aimed at reducing greenhouse gas emissions, fostering energy security, and promoting renewable installations make Waaree’s market outlook favorable.

In particular, the company’s investments in backward integration and capacity expansion, alongside its focus on large-scale solar installations, align well with national and global trends supporting renewable energy. This market support serves as a foundation for Waaree’s continued growth, enabling it to maintain a leadership position.

Investment Decision: Hold, Book Profits, or Buy?

The decision to buy, hold, or sell Waaree Energies’ stock hinges on individual investment goals and risk tolerance. Investors considering long-term prospects may find value in Waaree’s established market presence, its growing role in India’s solar transition, and its consistent financial growth. Holding the stock offers the potential for future gains, especially as the company scales production and capitalizes on renewable energy initiatives.

On the other hand, investors wary of market volatility and stretched valuations might choose to book partial profits. The stock’s rapid listing gains have already provided a solid return, and while long-term growth appears promising, the possibility of near-term price corrections could affect short-term performance.

For new investors looking to enter, it may be prudent to wait for a potential price stabilization phase. Given Waaree’s high valuation following its listing, waiting for a dip could provide a more favorable entry point, particularly if profit booking continues in the short term.

Conclusion: Waaree Energies, a Solar Leader with Growth Potential

Waaree Energies’ stock debut has certainly captured attention, with its substantial listing gains marking an impressive start. As India’s solar industry continues to grow, Waaree is strategically positioned to benefit from the ongoing shift toward renewable energy. With strong financials, a solid order book, and government support, the company holds considerable promise for long-term investors.

However, given the stock’s rapid ascent, investors should consider their personal risk tolerance and investment timeline before making a decision. Whether choosing to hold, sell, or wait for a potential dip, Waaree Energies remains a pivotal player in India’s energy transition, and its performance in the coming years could offer substantial rewards for those willing to navigate market dynamics.