Shares of Acme Solar Holdings Ltd. experienced a slight decline of 2% in Thursday's trading session, despite Axis Capital initiating coverage on the renewable energy company with a 'Buy' rating. The brokerage firm has set a target price of Rs 550 per share, suggesting a significant 31% upside from the current price levels.
Axis Capital's optimistic outlook is primarily driven by Acme Solar's strategic transition from a conventional solar independent power producer (IPP) to a sophisticated renewable energy project developer. The company currently boasts 3 GW of operational capacity and is actively expanding into more complex projects, including battery energy storage systems (BESS).
Strategic Shift and Project Pipeline
The core of Acme Solar's transformation lies in its ambitious project pipeline. Approximately 95% of its 5.4 GW under-construction and pipeline capacity comprises these complex renewable energy projects. This strategic pivot is expected to be a major catalyst for strong earnings growth in the coming years.
Furthermore, Acme Solar is significantly expanding its footprint in battery storage, with an estimated addition of around 17 GWh of BESS capacity. This move positions the company to capitalize on the growing demand for stable and dispatchable renewable energy solutions.
Commissioning and Financial Outlook
Acme Solar aims to commission its first complex project by December 2026. However, Axis Capital's report factors in a potential one-year delay for the full portfolio to become operational by FY30, attributing this to industry-wide transmission constraints. Despite these potential delays, the long-term outlook remains positive.
Financially, Axis Capital projects Acme Solar's Ebitda, excluding other income, to reach approximately Rs 89 billion at a run rate, demonstrating a robust 38% compound annual growth rate between FY26 and FY31. The brokerage estimates a capital expenditure of around Rs 520 billion from FY27 to FY30 to bring the company's under-construction and pipeline projects to fruition. This substantial investment is expected to be funded through a combination of internal accruals, existing cash reserves, and qualified institutional placement (QIP) proceeds. The report also anticipates an improvement in the net debt to Ebitda ratio, from 7.2 times in FY26 to 5.9 times by FY30, alongside operating cash flow after interest reaching around Rs 30 billion at run rate, supporting further capacity expansions.