BESS Optionality
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Can anyone closely tracking WRTL help out please?
I am not sure what to make of the current results. It has consistently posted a healthy YOY growth in both revenue and PAT. That was very much visible and expected, so no surprise there. The concern lies about sustaining this growth rate which came under question from last quarterly results.
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In FY25, WRTL posted ~1500 crores of revenue and it had an unexecuted orderbook of ~3000 crorees. So FY26 being stellar was visible. But what will happen in FY27 and FY28 is questionable. It posted ~3000 crores in FY26 with an orderbook of ~2700 crores as per the last quarterâs disclosure. In the latest quarter they have shared an orderbook of 5300 crores but it includes their recent acquisition of T&D epc company, 2700 crores from the acquired company and the remaining orderbook has a healthy BESS contribution. The core solar epc orderbook is small and it seems to be not picking any pace despite they claiming that the solar pipeline is huge (30 GW).
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The question I have is, why their core EPC business not picking up any pace. Is it a industry wide slowdown or they are now not able to win bidding wars??
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Hi Vikas,
You need to look WRTL as an EPC player in Solar, BESS and T&D (recent acquisition). Management has guided multiple times that long term EBITDA for this business would be 15%.
The stock is going through a multiple derating where market will give it P/E multiples for a typical EPC player which can range between 10-20 depending upon the quality of management and the moat. I think WRTL is already there at the upper range and in my opinion this business should be getting 15-16X given intense competition. Also, market must be factoring in the reduction in EBITDA margin from ~19% to 15% going forward.
Honestly, I donât see much downside given the revenues this year will still grow at >20% and BESS/T&D business has multiple tailwinds which should ensure growth for FY28 as well. At CMP, if you reduce earnings multiple to 18 and EBITDA margin to 17% for this year subsequently to 16 and 15%, there seems to be a little downside whereas if anykind of rerating happens in the stock due to BESS, there can be a significant upside.
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Thank you Kanv for sharing your views. I had no benchmark for what should be a multiple for an EPC business, and your numbers give me some perspective.
The business has real tailwinds; there is no doubt about that. My concerns for this company have always been on the order book side. Given their rapid pace of execution, itâs worrisome that the order replenishment is not happening at the same pace. I heard the last quarter concall, and the management sort of ignored the question about new orders and simply said: âmaybe next quarter we will get orders because the pipeline is hugeâ.
All I have is a sign that they have not received huge orders for the solar EPC segment. Instead of guesswork, what I will do is check out whatâs happening with the order books of their competitors and deduce if the orders have slowed down for the entire industry or WRTL is the odd one out here. I will share my findings here once I have some.
Well, from the recent concall and considering the investor presentation, First of all the the order book on EPC side had decreased YOY . However, Overall number of order book more than 5000+ crore is flashy. The negative thing which i feel about is the orderbook around T&D business because management though confident about achieving the topline , there will be definitive pressure in terms of margins and they also slightly acknowledged to maintain around 15% , the positive thing is or which can be in the coming quarters to see its IPP business growing and to watch whether there real synergies in margins if we see waaree renewable in terms of pure integrated player. if you consider segment results , T&D MARGINS seems to be in single digits, and that worries . if we go through an assumption that waaree is moving towards commoditizing , still there will be problem on cashflow side as indicated in q4 2026 and overall fy 26(rising trade receivable and rising working capital days). The last thing is T&D business , though outright cash purchase but will be funded through debt so Rising interest costs will be key thing to watch.
Disclaimer - I am not financial advisor , This is only for Educational purpose.
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Something to allay some concernsâŚthis is likely to add atleast 1000cr to the solar epc orderbook.
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Some thoughts after going through the concall and doing a bit of digging on solar epc orders:
Solar EPC Orders
- Industry wide orders have been slowed down and major reason is front loading of orders in FY25 & FY26 before the ALMM II deadline. So, orders have bottomed out in recent quarters and expected to pickup industry wide.
- Another reason for order slowdown could be industry wide bottleneck in energy evacuation. Same reason why BESS orders have started coming in now.
Views after reading the concall
- I listened to last quarterâs concall and this quarter I read the transcript. It is my personal read that the management seems to be going after the topline expansion and sustenance any which way and below pointers make me believe so.
- They have acquired APSPL with a 55% stake and itâs funded 75% through debt. Although the logic is like forward integration to cover till grid connectivity but T&D carries half the margins of pure-play solar EPC. Same questions were raised in the concall with vague answers on how the margins will sustain at 15% that they have guided repeatedly for long-term. Interest costs, rising working capital and lower T&D margins can bring down the margins further without a proper integration plan which is not evident from the calls.
- In their 2400 crores solar epc orderbook, they said 30-40% is from associated companies and a proper clarity was missing and the person who asked to provide clear bifurcation was asked to write to the investor relations. EPC companies need orderbook and efficient cash management, and having no clarity on existing orderbook is a big red flag. Attaching the screenshot for this conversation:
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No guidance on solar epc projects: Management has been repeatedly deflecting these questions with vague promises like âmaybe upcoming quarters will be better..â and they kept on deflecting by pointing towards the combined orderbook of 5300 crores (when the question is specifically for solar projects) and the massive bidding pipelines.
Disclosure: My views are biased given I exited 70% of my position in the last quarter and might be looking at everything thatâs bad. Historically also EPC businesses suffer due to bad capital management so I am overly cautious on big expansions, debt, rising working capital etc.
Also, I am pretty new and crude about these kind of business investigation so if anyone who is actively following this business and can help me understand counter perspective then it would be of great help.
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