‘Too cheap to ignore’: Jefferies initiates coverage on Emmvee photovoltaics, sees 70% upside

India’s solar manufacturing story is entering a phase of rapid scale-up and Jefferies believes select local players are well-positioned to capitalize on this transition. In a new report, the global brokerage has maintained a buy rating on Emmvee Photovoltaic Power citing strong growth visibility, policy support and attractive valuations and Rs. Initiated coverage with target price of 320, which is 70% upside from current levels.

Jefferies expects India’s annual solar installations to grow at a CAGR of 24% between FY25 and FY28, driven by declining solar tariffs, growing power demand and adoption of battery energy storage systems.

According to the brokerage, solar power tariffs have consistently been lower than the cost of new thermal power over the last four years, making solar the preferred choice for utilities and industrial users.

Rs. The recent discovery of a solar-plus-storage tariff in the range of 3-3.5 per unit has strengthened the case for renewables. Jefferies notes that this tariff battery storage costs Rs. 4.5-5 per unit, which is still Rs. 5.4-5.8 compares favorably with the marginal thermal power tariff per unit. Importantly, solar-plus-storage contracts lock in prices for 25 years, unlike thermal power where costs increase annually.

Against this backdrop, Jefferies sees solar emerging as the dominant renewable energy source in India. It projects annual solar installations to increase to 65 GW by FY28 from around 34 GW in FY25.

Policy support is a key driver for domestic manufacturers. Government regulations such as the List of Approved Models and Manufacturers (ALMM) and local content requirements for public sector projects have effectively reserved a large share of the market for Indian manufacturers.

This has created a shortage of domestic solar cells, increased module prices and improved profitability for domestic players. Jefferies expects similar policy protections to eventually extend to upstream segments such as ingots and wafers.

Emmvee, according to the brokerage, stands out because of its early move into high efficiency TOPCon cell technology. The company is the first in India to commission large-scale TOPCon cell capacity, with 3 GW already operational by September 2024. Its collaboration with Germany’s Fraunhofer Institute and the use of German-sourced equipment are expected to keep operating costs competitive.

The company is also expanding aggressively. Jeffrey estimates that Emmvee’s cell and module capacity will grow to 8.9 GW and 16.3 GW respectively by FY27. Unlike some peers, Emmvee is focusing on the core solar value chain and does not plan to diversify into batteries or inverters.

While Jefferies admits that domestic oversupply may pressure margins in the medium term, it expects industry profitability to stabilize by FY28 as inefficient capacities are closed and stricter efficiency norms come into force. Even after normalization, Emmvee is expected to deliver high-teen return on capital.

On the numbers, Jefferies forecasts a 56% EBITDA CAGR between FY25 and FY28, supported by rising volumes despite some margin compression. At current levels, shares trade at about a 50% discount to peers, prompting Jefferies to value Emmvee at 9x forward EV/EBITDA.

According to the brokerage, risks include expected-weak domestic solar demand and the possibility that all announced capacity will be operational.

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)