Sterling & Wilson Solar Ltd. - Will the Sun Keep Shining?

Worth reading and listening to all the information this company has shared in the past 3-4 months.

It’s a turnaround which if executed well then we’re looking at a massive runway ahead.

Undervalued with a good RR.

Early adopters can consider it, rest can wait for some momentum.

Q4 results & commentary will set the tone, and pace.

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So how do we see this impacting SW SOLAR?

Hmm ……

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None in my view. This is a totally different business under S&W group

Would this impact SW

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Anyone have further information on the much anticipated ‘turnaround’ ?

Basis scuttlebutt - legitimate & well respected PMS players have been adding for their clients across the past 2-3 weeks and positions have been made.

Would appreciate any information from those closely tracking.

Invested & sized at 50% for now.

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Their khavda project is facing major cost pressures…next few quarters to be muted

What is this news of Khavda cost pressure based on? Can you share any articles/links. My understanding was that post COVID they have changed their business model to where the client is responsible for payment of RM and they do not carry any risk of materials.

Additionally, since they will become almost debt free, thats close to 200 Crs that will get added to bottom line in addition to top and bottom line improvements from new projects. So what is the basis for saying muted growth for next few quarters?

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Can you eloborate more on this or share the news where did you pick this up from . I understand the NTPC project includes the module as well and for this they need not have to source in india as ALMM Is in effect from April and prices are only dropping in internatinal market.

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Going by Waaree concall just 25% to 30% of their order book includes module supply in their scope.

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Rating Upgrade

please note that Acuité Ratings and
Research Limited (“Acuité”) has upgraded its short-term rating to ‘ACUITE A4+’ (read as
ACUITE A four plus) from ‘ACUITE A4’ (read as ACUITE A four) to Rs. 100 Crore of shortterm commercial papers of Sterling and Wilson Renewable Energy Limited (“the Company”).
Further, on the request of the Company, Acuité has withdrawn the short-term rating on Rs. 200
Crore commercial papers of the Company. The Company does not have any outstanding
commercial paper as at date

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Results update.
Pursuant to Regulation 29 of the SEBI Listing Regulations, please note that a meeting of the Board of Directors of the Company is scheduled to be held on Saturday, April 20, 2024 interalia, to consider and approve the Audited (Consolidated and Standalone) Financial Results of the Company for the quarter and financial year ended March 31, 2024 (“said results”).

Thats the reason i said the price will not be same

Sterling & Wilson Q4 : strong numbers and turnaround is visible

Finally turns profitable!!!

Rev at 1178cr vs 88cr

EBITDA at 63cr vs loss

PBT at 34cr vs -418cr

PAT at 1.4cr vs -421cr

OCF at 538c vs -1829cr

New orders with 488 crores (I was expecting significantly more)

Nigeria order still didn’t close

0&M margins are still lower

Got second international order

Q4 PAT was affected by a non-cash deferred tax asset charge

Rationalization of overheads continue to progres.

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Considering Overhead makes a huge % of the expense. How do we know any further increase in revenue will not proportionally increase overheads?

Management has only said “Our employee cost and other costs are not related to the increase in revenue, and we are not
Expect the overheads to go up significantly from what has already been given for the current financial year”

My question is, How? & How much revenue can they generate without meaningfully adding up the overheads?

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Have tried to capture my views & a deep dive into the recent concall in this thread. Pls go through, it should answer a lot of questions. Valuation despite the rally is not very expensive vs. peers in my view.

https://x.com/DagaVish/status/1791906364668903513

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Also this doesn’t include Reliance or Nigeria orders. If those come it would change these numbers.

This Is Great. I went through concall and the management stated that they would try to further bring down or stabilize overheads and thus operating leverage should kick in. Overheads should stay in 330-380 Cr Range

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The tax rate for last quarter Q4 and this quarter Q1 is pretty high 96% and 67% respectively. Does anyone know why?

Due to deferred tax liabilities. I think from next quarter it will be not there.

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Company profile: The company provides EPC and O&M services under turnkey EPC and BoS solutions for utility-scale, rooftop, and floating solar power projects. It also offers solar plus storage solutions. It boasts an EPC portfolio of 19.4 GWp and an O&M portfolio of 8.2 GWp. It has a presence across 28 countries.

a) Q1 FY25 results: The company’s Q1 FY25 revenues stood at Rs 915 crores, up 78% YoY, whereas gross margins stood at 11.1% versus 11.3% YoY. EBITDA stood at Rs 37 crore versus a loss of Rs 34 crore YoY. PAT stood at Rs 5 crore versus a loss of Rs 95 crore YoY. This was the second consecutive quarter where the company posted a positive EBITDA, PBT, and PAT on a consolidated basis. On a QoQ basis, revenue declined 22% due to tighter liquidity conditions and the fact that Q4 is the strongest quarter of the year.

B) Orderbook and order inflows: The company’s order inflows for Q1 FY25 stood at Rs 2,170 crore versus Rs 488 crore in Q4 FY24. The company’s unexecuted order book as of Q1 FY25 stood at Rs 9,396 crore (70% is domestic and 30% is exports) versus Rs 8,084 crore as of Q4 FY24. The company has also commenced a pilot project for solar plus BESS for Reliance Industries at Jamnagar, Gujarat.

C) Debt Status: The company’s net borrowings have declined by Rs 19 crore and the total net debt as of Q1 FY25 stood at Rs 97 crore. Net working capital continues to be negative at Rs 732 crore as of Q1 FY25. Also, the company has no scheduled debt repayments till Q3 FY25. Also, on a net basis, the company will receive about Rs 85-90 crore in indemnity claims from the promoters which will largely take care of the debt repayments in FY25. The balance debt of Rs 328 crore post November 2024 will be paid in installments commencing from December 2024 to October 2026.

D) Outlook for FY25: The following is the outlook provided by the management for FY25:

  1. The management has provided a revenue guidance for FY25 at Rs 8,000 crores. It has been reiterated that revenues will start inching up from Q2 onwards with the majority of it being earned in H2 FY25. For context, FY24 revenues were Rs 3,035 crore.

  2. It has also provided an order inflow guidance of Rs 8,000 crore (excluding the Nigeria & RIL orders) for FY25. Domestic ordering activity is expected to pick up from Q2 FY25 onwards as Q1 was muted. In terms of bid pipeline, the company is actively pursuing projects worth 23 GW in India and 5 GW in other geographies.

  3. Also, low module prices globally make the time ripe for more projects to come onstream.

  4. Margin profile for both domestic and international projects largely remain in the range of 10-11% as major international legacy projects are now behind. EBITDA margins are also expected to recover to 4-5% in the medium term due to better absorption of fixed costs with the increase in scale of operations.

  5. With respect to the Nigeria MoU (961 MWp along with BESS capacity of 455 MWh, approx. value Rs 12,483 crore), the company expects it to get finalized very soon as the final terms have been negotiated and procedural steps are in progress. Also, there is no risk from regime change in the US as the project is already an approved one in their list.

  6. The Reliance pilot project will be completed in FY25 itself. Many new technologies are being tested which would set the base for larger projects with RIL. Also, with respect to the land allocated to RIL at Khavda, Gujarat, the company expects to receive orders soon.

  7. Also, the company is making efforts for a credit rating upgrade which will ease the liquidity for the company and increase the fund-based and non-fund-based limits.

  8. The company is taking orders on a BoS basis along with the modules. However, it is extremely cautious with respect to the module price risk. It has onboarded multiple vendors for supply of modules.

E) Some key risks: Here are some key risks found in the company:

  1. The management has repeatedly emphasized that order inflows could remain lumpy.

  2. During the quarter, promoters sold stake in minimal quantities. Also, 37.2% of the promoter holding remains pledged.

  3. Arbitrations are going on for certain projects in the US, on which the company will inform stakeholders on any material developments. This is with respect to invocation of bank guarantees worth Rs 400 crores.

  4. Nigeria order was to be finalized in Q1 FY25 but has witnessed a delay. This remains a key monitorable.strong text

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