Nuvama has initiated coverage on ACME Solar Holdings with a ‘Buy’ rating, setting a target price of ₹328, implying a potential 68% upside from current levels. The brokerage highlighted ACME’s integrated model—covering land acquisition, engineering, procurement, construction (EPC), and operations & maintenance (O&M)—as a key advantage, enabling cost efficiency and execution excellence.
Strong growth outlook in renewable energy
ACME is well-positioned in India’s fast-growing renewable energy sector, particularly in firm dispatch renewable energy (FDRE) projects, which combine solar, wind, and battery energy storage systems (BESS) for round-the-clock (RTC) power supply. With India facing potential power deficits by FY30-32, the demand for RTC renewable energy is expected to surge, creating a favorable business environment for ACME.
The company aims to scale its installed capacity from 1.3GW in FY24 to 7GW by FY28, with nearly 53% of under-construction capacity already tied to power purchase agreements (PPAs). This expansion is expected to drive an adjusted EBITDA CAGR of 70% over FY24-28, outpacing the capacity CAGR of 51% during the same period.
Key highlights from Nuvama’s report:
- Target price: ₹328 per share, implying an 8.9x FY28E EV/EBITDA multiple.
- Capacity expansion: Growing from 1.3GW in FY24 to 7GW by FY28 (2.5GW operational, 4.5GW under construction).
- EBITDA growth: CAGR of 70% over FY24-28, with projected EBITDA exceeding ₹7,000 crore once all under-construction projects are operational.
- Cost efficiency: ACME’s in-house EPC & O&M model reduces reliance on third parties, providing a competitive edge.
- Blended tariffs: ₹3.5/kWh, with 86% of the portfolio contracted to central off-takers, ensuring stable revenue.
Risks to watch:
- Execution challenges: Cost pressures, PPA execution delays, and regulatory hurdles could impact growth.
- Debt management: Expanding capacity significantly requires substantial capital investment.
- Renewable energy variability: Dependence on solar and wind intensity may affect power generation levels.
Conclusion
With India’s power demand set to rise and renewable energy playing a crucial role in bridging the supply gap, Nuvama sees ACME Solar as a key beneficiary of this transition. The company’s firm dispatch renewable energy projects and aggressive capacity expansion plan position it well for long-term growth. At current valuations, the stock trades at 7.6x FY28E EV/EBITDA, a steep discount to sector peers (13x), making it an attractive investment opportunity.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions.
