Nigeria would be a big plus if happens. Problem is that management is casually reducing thier guidance given excluding Nigeria. Even there was not much update on reliance orders.
Ceo leaving is certainly worrisome. Could be related to how he misled everyone in the recent quarters. If it’s just a client pushing it by a quarter, they could simply state that part of Q4 revenue will show up in Q1 next year. But nothing of that sort.
However, my view is that Ops leverage would show up and PAT margin will go up as they reach close to 10k revenue. So, to me, that feels like the best case. I also hope that the new ceo comes from a reputed company that gives investors community soke confidence.
In my experience this typically happens when a new Senior Management team appointments are done by Main Promoters who want to direct company to better growth trajectory OR put their known reliable folks in charge.
Letting a CEO go who didn’t perform is a good pointer for future but who gets his position is important trigger.
Also, For Nigeria Order of 2 billion USD , i think such bigger orders involving a Govt entity and multilateral agenices typically takes lot of time and contract has to be fine tuned to each parties required clauses, risk assessment and this takes lot of negotiations on each and every finer details
Company guided for 8000 Cr but now can achieve only 6000-6500. Still a good number. But market is disappointed due to overpromising.
Credit rating improvement would ease the line of credit and cost. Should allow them to grow
Reliance new energy limited holds 32% of shares. Gives a comfort in terms of order inflow
Concerns - CFO and CEO resignation in last quarter. Could be that the promoter group wanted a rejig. Can’t use it as a deciding factor as no other info is known. New CEO profile looks similar to previous one.
The stock price has significantly corrected from 1 year ago with PB correcting from 18 to just 6 now. PE is not meaningful at the moment as the co is just turning profitable.
Earnings are just turning positive. The EPS corresponding to the revised estimate (6500 Cr) is around 15, which should give a PE of about 17. Still could be a bit expensive, but given the growth rate it is agreeable.
If the company reaches a steady state revenue of 8000 Cr (mgmt mentioned about 2500 Cr of Q4 revenue as steady state), it can have an EPS of about 23.5.
Considering other similar companies like KPI green, if we take a target PE of 20 in FY26, we can arrive at target price of Rs. 460 compared to current Rs 250.
Strong order pipeline is there even without the Nigeria project.
Disc: Had exited with some loss. Might add now again as risk reward seems fair.
Guys while I like SW real potential( biggest solar epc player) but I don’t understand why they are working on 3-4% EBITA margins? Their peers are earning 10-15% EBITA margins.
Can anyone help me to know what is their future guidance about margins (short term and long term?
Thanks
Just fed the latest concall and analyst report into deepseek and asked it to summarize.
Causes of Low EBITDA Margins
Execution Delays:
“realigned project timelines as per customer requirements… likely to result in execution spill over by 1 to 2 quarters” (Chandra Thakur, CEO). “legacy project… incurred a one-time cost to achieve final punch point costs” (Sandeep Mathew, CFO).
Financial Constraints:
“progress on easing up limits on the non-fund-based side has been slower than hoped” (Sandeep Mathew). “recurring overhead remaining steady… operational leverage not yet fully realized” (Sandeep Mathew).
Competitive Bidding:
“PSU orders are most competitive… witnessed lower margins” (Chandra Thakur).
Outlook for Margin Improvement
Scaling Execution:
“targeting INR2,300–2,500 crores in Q4… exit run rate sets stage for FY26” (Sandeep Mathew).
Does reliance have seat at the SW board ?
How much % of total projects SW is doing for Reliance ?
Anyone around here who may answer ? (The query is genal query and is not about SW solar or solar project …this is about any type of project)
For ex. a company does 100 Cr project for reliance where reliance has 40% stake.How much company can charge them…can they charge 15% margin ? …if yes… does reliance get any benefit out of this 15% ?
Anyone aware about what happened to companies where reliance took stake and got them to execute projects ? how has been their growth ?
Nigeria project is like polavaram project in AP. Project will pass on to next generation on promise of completing it now but never did that. I am hearing about this for morethan a year now and still going on. I know big projects takes time but I track many companies and none had delayed for such long period
I happened to do some serious scuttlebut on this company and have been listening to its concalls.
Sharing pros and cons based on my learning from above mentioned activity.
Cons
From scuttle-but ( talking to an ex- BD,South Africa, of SW Solar) my takeaway were as follows
a)Nigeria order is less likely ( maybe its just a carrot to keep gullible investor interests alive).
b)There has been huge talent drain… CE0, CFO, BD Head, a senior lady who joined Gensol and others left SW SOLAR, timing of exits with 6mths, of few top personel,(when investor had just started believing the turnaround story based on the mgmt commentary of orderbook visibility and execution timelines.) also spooked markets.
The reason that I uderstood in scuttlebut, for the above talent drain was management style ( board had less decision making power, promoter founder had become more risk averse in bidding for projects.)
c)CKD the new CEO is not looked upon as capable leader to lead by the employees.
d) The hiring of talent and filling in for key positions have been slow. People from lower or next ranks in company were elevated to fill in the shoe and run the show.
Managment commentary seemed inconsistent on concalls.
How could the order execution numbers change in a quarter ?.
Only two things I could infer for the same
i) Mgmt is incapable to execute orders ( not competent to plan and forecast)
Or
ii) If we believe the commentary then the company seems to vulnerable to delays in project execution due to reasons to be blamed because of its customer.
Either of the above assumptions coud be hazardous for investors
Thou Reliance is a big share holder, for past few years many of their invested stocks seem to have gravely underperformed. That may cast doubts about their plans if they are aligned with retail shareholder interests.
a) Justdial ( 5200 cash equivalent sitting on books for longtime…what its rationale not understood by me)
b)TV 18 ( had planned merger and then dropped. )
c) Network 18
Pros
Stock has corrected almost 70% from highs.
In scuttlebut, a Consultant informed the competition was fierce. A player was bidding for BESS projects at loss, just to build a portfolio to bid future projects.
But this company has been in news for wrong doings ( multiple business, multiple QIPS, selling stock etc) is now in troubled water.
Hence foul competition may reduce to some extent,augurs well for the industry.
Finally they found a new CFO and have appointed him.
Reliance’s interest alignment with minority shareholders/retail shareholders is getting echoed in closed circles, might shakeup the status quo and create wealth for investor along with the business.
These are the exact reason why I feel it’s a sure shot doubler. Well, almost sure shot doubler here! Price is close to Reliance acquisition price and with reliance orders just an eventuality the news flow itself would double the prices up!
My crude calculations
BEST CASE, FY26
Rev 10Kcr ~ 8% OPM
Operating Profit = 800cr
other income 100cr depreciation 20cr Interest 100 cr(say)
PBT 780cr
Tax of 24%
PAT 590cr > EPS = 21.75 > Fwd PE of 10-15
Based on present numbers:
Rev 10Kcr ~ 3% OPM
Operating Profit = 300cr
other income 86cr depreciation 15cr Interest 50 cr(say)
PBT 320cr
Tax of 24%
PAT 243.2cr > EPS = 9 > Fwd PE of 25-30
Since the last few quarters, my faith in the management has reduced drastically.
So, I’ll only enter when I’ve got a good margin of safety.
Earlier, I entered around 470 saw 800, and sold at 387
Thanks for the effort Sanjay.
++ to your observations
SW Solar is hiring in decent number recently. They are hiring Senior positions i.e
Project manager, construction managers, looks like they are hiring for a big project.
Good to know.
The stock is on radar.
But discomfort is due to lot of Reliance invested companies underperforming(difficult to contemplate this coincidence) and existing management has been consistent with negative surprises.
Nevertheless a doubler from this valuation cannot be ruled out.
I had the same question. Then I looked at the margins of K.P. Energy. Which is only CPP. Margins of SW Solar seems very low. I assume land ownership would be a major differential.
Hi All, What is your opinion on their 1-2% PAT margin? Or a 5% Op margin?
Company seems to be happy with 10% gross margin which eventually leads to above numbers unless a big revenue increase inches OPM by a few basis points.
p.s. Invested expecting revenue jump w/ order inflows from Reliance.
After waiting for nearly 1 year, one thing I realised was that no matter how good your results are,
Negative working capital has increased from the previous year, and it’s a highly capital-intensive commoditised business model, and perhaps the market has already realised thats why it is in a downtrend.
And last,ly this stock was very much popular on social media platforms, where after reaching 800 levels, its story is down… now no more discussion on it… only those who bought around 600+ levels are mostly worried about this.
Finally this is good lesson and good learning for me to avoid fomo in popular stocks no matter how great the business be.
