Premier Energies: Why is Nuvama so bullish on this stock; see target price
Premier Energies is a company that is active in the domain of solar power. Major brokerage Nuvama has given it a Buy rating and set this target price. Premier Energies is one of the biggest manufacturers of high-efficiency solar photovoltaic cells and panels in the country.
Kolkata: Premier Energies is one of the biggest manufacturers of high-efficiency solar photovoltaic cells and panels. It also provides integrated EPC (Engineering, Procurement, Construction) services and O&M solutions for solar power projects for a wide variety of clients.
Nuvama has said that Premier Energies can aggressively pursue emerging new energy opportunities. It also seems poised to ride a sector-wide J-curve breakout. It has also mentioned that similar to the IT sector's valuation trend during 2020, the stock's high 24x FY25 EV/EBITDA signals robust growth and earnings trajectory.
Target price for Premier Energies
Nuvama has assigned a Buy rating for the stock. It has set a target price of Rs 1,270 for the stock. On Thursday, Nov 27, the Premier Energies stock was trading at Rs 982.00, up Re 0.60 or 0.061%. The 52-week high is Rs 1,388.00 and the 52-week low is Rs 774.05.
J curve growth
Premier Energies is taking calculated steps to capitalise on the rapid growth in new energy, similar to the J-curve, while core solar is meeting expectations, highlighted Nuvama. Its growing capacity, backward integration, and continued DCR-linked realizations support the projection of revenue/EBITDA CAGR of 49%/43% for the FY26–28E period, mentioned the brokerage.
Medium-term margins, valuations
The brokerage said that concerns about overcapacity in the solar sector are blown out of proportion. Margins will remain somewhat tepid in the medium term, but integration across wafers, BESS, transformers, and inverters will help sustain growth and mitigate risk for the company. Nuvama also thinks the high-growth industry which is in the early stage of lifecycle warrants higher valuations. However, the brokerage has cautioned investors against significant risks.
Nuvama said the high 24x FY25 EV/EBITDA for the company reflects robust growth and subsequent earnings growth, something similar to what the IT industry had in Y2K. Based on their estimates of a 43% BITDA CAGR, strong cash flow, a robust balance sheet, and RoE above 30%, we believe FY28E EV/EBITDA will be a decent 10x, said Nuvama.
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