Vikram Solar Q1 earnings miss highlights margin pressure and delayed cell capacity

Investment View and Valuation

Prabhudas Lilladher’s August 11, 2026 Q1FY27 result update retains an Accumulate rating on Vikram Solar, while taking a cautious view of the pace of earnings recovery. The broker highlights subdued near-term margin visibility, delayed backward integration into cell manufacturing and substantial debt-funded capital expenditure commitments.

Prabhudas Lilladher reduced its target price to Rs 173 from Rs 226, while retaining the rating. The target price is based on 5x March 2028E EV/EBITDA.

Q1FY27 Financial Performance

Vikram Solar reported Q1FY27 revenue of Rs 15.6 billion, up 37.9 per cent year on year and 7.6 per cent quarter on quarter, but 9.6 per cent below Prabhudas Lilladher’s estimate of Rs 17.3 billion. Module sales increased to 1,006 MW, compared with 999 MW in Q4FY26 and approximately 0.76 GW in Q1FY26.

Module realisation improved sequentially to Rs 15.02 per Wp. The report also cites Q1FY27 realisation of Rs 15.5 per Wp, compared with Rs 14.8 per Wp in Q1FY26. However, unit cost of goods sold increased by Rs 1.86 per Wp as aluminium, copper, EVA and cell costs rose. These increases could not be fully passed through amid intense competition.

Profitability weakened materially during the quarter. Gross margin contracted by 1,250 basis points year on year to 18.9 per cent, against the broker’s expectation of 31.0 per cent. EBITDA declined 48.0 per cent year on year to Rs 1.3 billion, 40.7 per cent below estimate, while EBITDA margin fell 1,330 basis points to 8.1 per cent. Adjusted PAT declined 85.2 per cent year on year to Rs 198 million, 77.1 per cent below Prabhudas Lilladher’s estimate. The result missed the broker’s expectations on revenue, margins, EBITDA and PAT.

Order Book and DCR Outlook

The order book stood at 7.9 GW as of June 2026, down from 8.2 GW in March 2026. Of this, 7.1 GW comprises entirely non-DCR module orders, limiting near-term margin visibility.

Management said DCR sales have commenced, primarily through the distribution network, and are therefore not included in the order book. It expects the DCR business to grow 2.0x to 2.5x sequentially over the coming quarters, with a higher DCR mix expected to support realisations. However, management did not provide FY27 earnings guidance because of uncertainty around ALMM-II, pricing and the DCR mix.

Backward Integration and Battery Storage Projects

Backward integration has been delayed. The planned 9 GW cell plant, previously expected in Q4FY27, could see its entire capacity spill into Q1FY28. Management expects only 40 per cent to 50 per cent utilisation in FY28 after a six-month ramp-up, delaying the margin benefit of in-house cell manufacturing.

Vikram Solar has reduced planned wafer and ingot capacity to 9 GW from 12 GW. The next 3 GW of cell capacity is planned for FY28 with upgraded technology.

Separately, phase I of the 15 GWh BESS project comprises a 7.5 GWh battery assembly plant in Chennai. The facility is targeted for installation by January 2027 and commercial operations from March 2027. The separate 7.5 GWh LFP cell plant is targeted for Q4FY29.

Capital Expenditure, Debt and Estimates

Management plans capital expenditure of about Rs 50 billion each in FY27 and FY28, with around 70 per cent expected to be debt funded. Vikram Solar spent Rs 5.0 billion in Q1FY27, around 80 per cent of which was allocated to the module facility, and guided for about Rs 47 billion of additional FY27 expenditure.

Prabhudas Lilladher forecasts total debt of Rs 26.8 billion in FY27E and Rs 40.7 billion in FY28E. The broker estimates FY26-FY28E revenue, EBITDA and PAT CAGR of 62.5 per cent, 43.2 per cent and 25.8 per cent, respectively.

The broker cut FY27E EPS by 42.0 per cent and raised FY28E EPS by 7.2 per cent, factoring in higher input costs and sustained margin pressure.