Shares of Vikram Solar Ltd. experienced a sharp decline of over 10% in Friday's trade, hitting a low of Rs 156.25 on the BSE. This significant drop followed the company's announcement of its first-quarter financial results, revealing an 85% year-on-year plunge in profit after tax (PAT) for the June quarter.
The solar energy firm reported a PAT of just Rs 20 crore for the quarter, a stark contrast to Rs 133 crore recorded in the same period last year. This substantial profit contraction occurred despite a robust 38% increase in revenue from operations, which rose to Rs 1,563 crore from Rs 1,134 crore a year ago.
EBITDA Margins Contract Amid Rising Costs
A key factor contributing to the profit decline was the significant contraction of Vikram Solar's EBITDA margin, which fell to a mere 8%. This is sharply down from 21% in the year-ago quarter and 16% in the preceding March quarter. The company attributed the squeeze on margins to escalating operational expenses across several categories.
- Employee Costs: Surged by 56% year-on-year to Rs 55 crore, up from Rs 35 crore.
- Other Expenses: Increased by 46% to Rs 114 crore, compared to Rs 78 crore previously.
- Depreciation: Saw a 34% rise year-on-year.
- Financial Costs: Jumped by 53% to Rs 49 crore.
Analyst Reactions and Future Outlook
Following the results, several brokerage firms provided their assessments. UBS maintained a 'Neutral' rating on Vikram Solar, with an unchanged target price of Rs 215. JM Financial, on the other hand, suggested an 'Add' rating, setting a target price of Rs 219. The Bloomberg consensus target, based on seven analyst estimates, stands at Rs 260, implying a potential upside of 55% from current levels.
Looking ahead, Vikram Solar is proceeding with the enhancement of its backward-integrated wafer and ingot manufacturing facility at its Gangaikondan site in Tamil Nadu. The capacity of this facility is slated to increase from 6 GW to 9 GW, with commissioning anticipated by fiscal year 2029. The company is scheduled to host an analyst call today, which may lead to revised target prices from some brokerages.