Premier Energies earnings beat as margins hold and 7GW cell capacity ramps

Investment View and Valuation

Motilal Oswal Financial Services Ltd. maintained its Buy view on Premier Energies following a strong 1QFY27 performance. The broker cited sustained profitability, high cell utilisation, capacity expansion and a growing order book as key positives.

The target price is Rs 1,240, based on a sum-of-the-parts valuation. Premier Energies' domestic module business is valued at 14 times FY28E EBITDA, while the new businesses are valued at 10 times FY28E EBITDA. The combined enterprise value is adjusted for net debt. The valuation assumes FY28E domestic-module EBITDA of Rs 40,892 million and new-business EBITDA of Rs 4,350 million.

1QFY27 Financial Performance

Premier Energies reported 1QFY27 revenue of Rs 24.6 billion, up 35 per cent year on year and 10 per cent quarter on quarter. Revenue was 6 per cent above Motilal Oswal's estimate. EBITDA increased 30 per cent year on year and 6 per cent quarter on quarter to Rs 7.1 billion, beating the broker's estimate by 13 per cent.

EBITDA margin was 29 per cent, compared with the broker's expectation of 27 per cent. Adjusted profit after tax rose 50 per cent year on year and 1 per cent quarter on quarter to Rs 4.6 billion, which was 25 per cent ahead of the estimate, supported by lower-than-expected interest costs.

Module and cell production stood at 953 MW and 844 MW, respectively. Capacity utilisation was 63 per cent for modules and 92 per cent for cells, highlighting Premier Energies' industry-leading cell utilisation.

Capacity Expansion and Margin Outlook

The broker highlighted the sustained 29 per cent EBITDA margin and high cell utilisation. The 5.1 GW Seetharampur module plant is fully operational.

Management expects trial production at the new 7 GW cell plant by the end of August 2026, with revenue contribution beginning in September 2026. Capacity utilisation is expected to reach about 50-60 per cent from November 2026 and 70 per cent by 4QFY27.

Management reiterated its 29-30 per cent EBITDA margin guidance, supported by strong FY27-FY28 demand, a favourable domestic-content-requirement (DCR) mix and the ramp-up of the new cell line.

Order Book and Demand Visibility

Premier Energies won Rs 30.1 billion of new cell and module orders in 1QFY27, largely consisting of DCR orders. This increased the order book to Rs 150 billion from Rs 140 billion at the end of 4QFY26.

Management indicated that 40-45 per cent of the order book is executable in FY28. Module orders are predominantly for FY27, while cell orders extend into FY28-FY29.

Non-DCR module inflows increased after the partial extension of ALMM-II. This benefits Premier Energies because its module capacity exceeds its cell capacity. However, management stated that non-DCR modules are not profitable, although margins improved slightly during the quarter.

Cell-order pricing remains exposed to silver, foreign-exchange and other input costs. Management said pricing is currently stable and that the company hedges aluminium and silver.

Transcon Power Transmission and Distribution Business

The acquired Transcon power transmission and distribution equipment business contributed Rs 1.06 billion of revenue, or 4.5 per cent of 1QFY27 revenue, and Rs 294 million of EBITDA.

Transcon's capacity is planned to expand from 6.75 GVA to 16.75 GVA by September 2026. Management guided for transformer-business EBITDA margin above 15 per cent and profit-after-tax margin of 8-10 per cent.

Management expects Transcon revenue to increase from Rs 4 billion in FY26 to more than Rs 12 billion by FY29.

New Business Initiatives and Key Monitorables

Premier Energies is advancing a US cell-manufacturing joint venture. Location finalisation is underway, with production expected in 24-30 months. The company is also developing a European office and a dedicated sales platform.

Key monitorables include:

• Timely commissioning and ramp-up of the 7 GW cell plant.
• Progress in the US cell-manufacturing joint venture.
• New DCR order flow amid the ALMM-II extension.