ACME Solar's BESS ramp-up and PPA-backed capacity support strong earnings momentum

Investment View and Target Price

In its July 30, 2026 result update, Motilal Oswal Financial Services reiterated its BUY rating on ACME Solar Holdings, citing strong earnings momentum, a substantial PPA-backed development pipeline and accelerating battery energy storage system (BESS) commissioning.

The broker's target price is Rs 427 per share, implying 18 per cent potential upside from the current market price (CMP) of Rs 361.

Strong 1QFY27 Financial Performance

ACME reported a strong 1QFY27 operational and financial performance, with revenue, EBITDA and adjusted PAT ahead of Motilal Oswal's estimates.

The outperformance was driven by a better-than-expected capacity utilisation factor (CUF) and BESS revenue.

Operational Performance and BESS Commissioning

Quarterly CUF improved to 30.9 per cent in 1QFY27 from 28.5 per cent in 1QFY26, supported by higher irradiation and improved plant performance. Power generation rose 23.4 per cent year on year to 2,020 million units.

BESS contributed Rs 2,260 million of revenue during the quarter, representing around 26 per cent of total revenue, following the phased operationalisation of about 3.1GWh. BESS EBITDA margin was 82 per cent, below the renewable-energy portfolio margin because it included power-purchase costs.

ACME commissioned about 2.3GWh of BESS during the quarter, taking commissioned BESS capacity to approximately 3.62GWh. Quarterly capex stood at Rs 29.5 billion.

PPA-Backed Pipeline and Capacity Expansion

Motilal Oswal highlighted that 76 per cent of ACME's 5.1GW under-construction pipeline is PPA-backed, which it believes provides visibility on planned capacity additions through FY28.

Management stated that operational capacity was 3GW, taking the combined operational and under-construction portfolio to 8.1GW. ACME signed PPAs for 600MW in 1QFY27, comprising a 300MW FDRE project and a 300MW hybrid project with SECI.

Management has advanced its BESS commissioning target by three quarters and now expects more than 10GWh by FY27-end. It also expects to commission 1.5GW of renewable energy capacity during FY27.

BESS Contracting and Merchant Market Strategy

Management said short-term BESS contracts had locked in more than Rs 14 billion of revenue at realisations of Rs 8 to Rs 10 per unit, covering roughly 70-80 per cent of the 10GWh FY27 BESS base. The remaining capacity may be contracted during the year or sold in the merchant market.

ACME intends to retain around 10GWh annually for merchant and short-term sales before shifting it to PPAs in the following year. Management expects this model to operate for the next three to five years.

The company has contracted about 90 per cent of battery procurement ahead of a 6 per cent China export tax from January 2027, although delivered battery costs could increase if lithium prices rise. Management also expects SECI-backed tendering to revive materially within six to nine months.

Financial Forecasts and Valuation

The valuation assigns 11 times EV/EBITDA to FY28E core EBITDA of Rs 53,844 million, increased from 10 times earlier, and 6 times to FY28E merchant EBITDA of Rs 11,651 million. After adjusting for net debt, the broker derives the target price of Rs 427.

Key Monitorables

• Pace of 1.5GW FY27 renewable commissioning.
• Delivery of the 10GWh BESS target by FY27-end.
• Sustainability of BESS margins.
• New bidding activity, including the expected revival in SECI-backed tendering.
• Progress on PPA signing.