Motilal Oswal has a Buy rating on the recently listed solar and wind energy play, ACME Solar Holdings. Pegged as one of the key renewable energy plays in the country, Motilal Oswal sees upside potential of nearly 40% and has set the target price at Rs 347 a share.
Motilal Oswal on ACME Solar Holdings: Valuation attractive
The brokerage house values ACME Solar Holdings at 10x FY28 EBITDA. In the last three months, the company’s share price has outperformed its peers and competitors like NTPC Green by 24%. Not just that, ACME has commissioned 1.6GW since IPO, NTPC Green has commissioned 1.9 GW, lower than its guidance of 3 GW in FY25. This capacity addition by NTPC Green also includes 50% share in Ayana acquisition of 2.1 GW. According to Motilal Oswal, ACME “offers a reasonable margin of safety given the aggressive PPA-backed capacity ramp-up and strong execution track record.”
Motilal Oswal on ACME Solar Holdings: New capacity addition, lower cost
Lower borrowing costs and new capacity additions are the key catalysts, as per Motilal Oswal. The company aims to commission 1.9 GW capacity in FY27, and this “will be a key catalyst for the stock.” The optimism springs from the fact that of the 450 MW capacity to be commissioned in FY26, “78% is already commissioned. Further, with 70% of its gross debt on floating interest rates, we estimate a 25 bps reduction in average interest cost adds 4% to our FY26E PAT.” ACME’s FY25 gross debt is at Rs 10,400 crore. That apart, new project wins would be another key catalyst for the stock, Motilal Oswal pointed out.
Motilal Oswal on ACME Solar Holdings: Lower net debt
That said, Motilal Oswal has reduced the FY26 EPS by 8.5%. This is to adjust the commissioning timeline for the 350 MW Sikar Solar project and Pokhran wind project between Q4 FY25 and late Q1 FY26.
The brokerage house has also reduced the overall capex estimates across the project pipeline following lower battery and solar module prices.
This also resulted in a downward revision of the FY27 net debt estimates to Rs 36,700 crore from over Rs 40,000 crore earlier. This is another factor that supports Motilal Oswal’s positive call on the share price of ACME Solar Holdings.
Overall, ACME Solar has a total of 6.9 GW capacity. This is including projects that are already operational, those under construction and those in the pipeline and are likely to be commissioned by the end of FY29. Based on the company’s performance so far, strong project management skills, boosted earnings and cash flow visibility, and eased investor concerns related to the execution of those projects in the pipeline.