Gensol Engineering top pick among renewable energy stocks on attractive valuations

  • Renewable energy stocks in India are gaining traction due to government support and investments. Few publicly traded firms offer opportunities in the transition to green technology. Companies like Waaree Renewable Technologies and KPI Green Energy have seen significant stock price increases.

Dhanya Nagasundaram
Published6 Jun 2024, 01:22 PM IST
Renewable energy stocks: Gensol Engineering stands out among listed peers in the renewable energy sector. With a strong order book and potential for growth, it is considered a promising investment.
Renewable energy stocks: Gensol Engineering stands out among listed peers in the renewable energy sector. With a strong order book and potential for growth, it is considered a promising investment.

Renewable energy stocks have been popular among investors as a result of increased government backing and substantial investments in India's renewable energy sector. The government aims to reduce carbon emissions by 1 billion tons by 2030 and achieve net-zero emissions by 2070.

The twin themes of energy transition and decarbonisation are gaining popularity, as seen by the growth of giant solar parks, hybrid projects, C&I, and rooftop solar. While the prospects are vast, just a few publicly traded firms are offering a piece of the pie in India's massive transition from fossil fuels to green and clean technology.

Also Read: Renewable energy stocks jump up to 500% in 1 year; what's fuelling this rise? What should you buy from the sector?

Furthermore, the renewable energy space has provided returns ranging from 400% to a startling 1200% in the previous year, there are a few stocks that remain at good valuations.

As per trendlyne data, in a span of one year, shares of Waaree Renewable Technologies has skyrocketed by 1,1200%, KPI Green Energy has surged over 400%, Gensol Engineering have jumped over 170%, and Sterling and Wilson Renewable Energy have climbed over 130%.

These companies have been striving to increase their assets and capabilities in order to assist India meet its 2030 objective of 500 GW installed capacity. Most have successfully secured large orders.

In the recent times, KPI Green Engineering bagged orders totalling 351.35 crore from several clients for projects such as building crash barriers for railway track fencing, solar projects, and electricity transmission line towers.

Similarly, Gensol Engineering reported a sizable order book of 1,783 crore at the start of FY25. This order book will be completed over the following 12 months, according to the company's BSE filing.

"Over the past two or three years, the renewable clean energy story has been building up at a faster pace, will stay at the center of focus by the government, and is expected to see the highest renewable capacity addition in the next few years. As per reports India has articulated its clear commitment to reach net zero emissions by 2070 and meet 50% of its electricity requirements from renewable energy sources by 2030. Hence, we are very optimistic about the sector as a long-term story," said Prashanth Tapse, Research Analyst and Senior Vice President of Research at Mehta Equities.

Also Read: Budget 2024: Green energy sector pitches for GST cut, easier FDI norms. Here is the wishlist

Gensol Engineering's valuation makes it the best bet for slice of action in renewable energy sector - Here's why

According to a recent report from brokerage Arihant Capital, Gensol Engineering appears to be in a stronger position among its listed peers. Let us have a look at a few key points highlighted by the brokerage to support its assessment of Gensol Engineering.

  • Gensol Engineering is one of India's premier solar engineering, procurement, and construction businesses. Gensol, which specialises in solar park and rooftop installations, has completed projects totalling more than 770 MW. The firm is also India's largest solar O&M provider.
  • According to the brokerage report, the company concluded FY24 with a topline of 996 crore, up 147% from the previous year, while PAT increased 129% to 53 crore. Gensol's Q4 revenue of 412 crore exceeded FY23's total revenue of 403 crore.Solar operations contributed 133% of revenue in FY24, totaling 833 crore. EBITDA for FY24 increased to 260 crore from 82 crore in FY23, with the EBITDA margin increasing from 20.3% to 26.1%.
  • At the start of fiscal year 25, the company's order book was 1,783 crore. Solar EPC accounts for the majority of the order book, at 1,448 crore.
  • The company is anticipated to seek for similar large-scale battery storage projects, which are key to addressing renewables' intermittent nature.
  • The firm has a presence in 19 Indian states and now operates in Africa, the Middle East, and Southeast Asia.
  • According to the brokerage, Gensol is trading at a discount to its listed peers due to its unique business strategy and the bright future of India's solar sector. Gensol outperforms its competitors on nearly all critical metrics. It is the cheapest stock available with solar EPC play in terms of both P/E and P/B. It has a solid EBITDA/income ratio of 26.2%, which is higher than most peers.

Gensol Engineering financial performance

Also Read: Why is Adani Power share price skyrocketing today? — explained

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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First Published:6 Jun 2024, 01:22 PM IST
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