This solar company has potential to create massive wealth for investors in FY25 | SW Solar Analysis

This solar company has potential to create massive wealth for investors in FY25 | SW Solar Analysis

what if I tell you that there’s a
company that has posted around 2,000 CR
of Revenue in f23 but has posted a loss
of 1175 CR in fact Comey has
consistently posted loss in last four
years with Roe of minus
56.7% would you like to invest in such a
company obviously by just looking at the
data the first reaction is it’s a
suicide to invest in such company isn’t
it but I’ve been closely tracking this
company for the last four quarters
before I built my conviction that it
could be a potential turnaround story
can you guess the name of the company
well it’s s SW solar that is Sterling
and Wilson Renewable Energy company got
listed in 2019 at 780 rupe and over the
next one year it share price tanked 90%
and Company was on the verge of
bankruptcy however it share price is now
back to levels of 680 now before you
make a perception about the company just
by looking at its weak Financial profile
I want to share the Journey of this
company that has a history of nearly 100
years and why it could be a big
turnaround story for fi25 and Beyond but
before we begin a disclaimer that this
is not a sponsored video I don’t do any
paid stock analysis if you are following
my channel you would know this and
please watch this video till the end to
understand the reason behind potential
turnaround and please do your further
research before investing your own money
because there have been cases in the
past where many companies have shown
turnaround potential but have failed
however if the turnaround is successful
these companies could become huge wealth
creators one of the great example is
Aisha motor where management was
planning to shut down its loss making
arm of Royal Enfield bikes in early 2000
however it got turnaround and generated
nearly 4,000 times return in the last 25
years so it’s very important to
understand what caused the problem for
the company and what resulted in the
turnaround usually it’s the change in
management or the business model and in
this video we’ll exactly try to
understand this potential turnaround
story of s SW Renewables all right let’s
get
started so it all started in 19 27 when
shapurji mystery a prominent
industrialist made a deal with Maran
darala of Wilson Electric work so
Sterling came from Mr mystery’s
investment form and Wilson from Wilson
Electric work to form Sterling and
Wilson it was basically an electrical
contractor form that worked on iconic
projects like Taj Mahal Mumbai then
Reserve Bank of India building World
Trade Center at K pared Mumbai and so on
eventually by 80s Sterling and Wilson
became the largest MEP and EP player in
the subcontinent so me stands for
mechanical electrical and plumbing
service and EPC stands for engineering
procurement and Construction in 2019
Sterling and Wilson got demerged and
listed it solar EPC business with Nam
Sterling and Wilson renewable energy now
let’s first understand the current
business of the company so basically s
SW solar is involved in the business of
setting up large scale renewable energy
parks that include mainly solar wind and
battery energy storage system now it’s
important to understand the various
business models within EPC domain so
first model is third party EPC for turky
projects where EPC company provide full
EPC services including procurement of
raw material engineering and
construction operation and maintenance
is typically performed by the EPC
company for the at least 2 years in
second business model there’s partial
procurement where the client decide to
Source modules and other component
directly and EPC company provides
engineering and construction and partial
procurement operation and maintenance is
typically performed by the EPC company
for at least 2 years third model is
where EPC company is also the developer
that develops the project and sells
project right to asset owner prior to
construction operation and maintenance
is retained by EPC company and in fourth
model the developer of the project
itself performed the EPC work along with
operations and maintenance and asset
ownership I hope you got a fair idea of
EPC business model just to give you an
idea today the largest EPC company in
the world is L&T in short the work of s
SW solar is to BU build solar plants and
charge a fee which is one time in nature
and it may also operate and maintain the
solar plant for yearly fee which is a
recovering Revenue stream now this slide
shows the Journey of s SW solar till
2019 in 2011 it ventured into solar EPC
business and by 2015 it was India’s
largest solar EPC company in 2017 it
demerged at solar EPC business to focus
on opportunities in solar business by
2018 it emerged as world’s largest solar
EPC player with presence in India Middle
East Africa southeast Asia Europe us
Australia and its global market share
jumped from 0.3% in 2014 to 4.6% by 2018
in short s SW solar was growing Leaps
and Bounds this chart shows the
exponential rise in company’s annual
turnover between 2015 till 2019 since
there was exponential rise in demand for
solar projects s SW solar was on high
growth trajectory however company’s
downfall started right after the IPO
mainly due to covid this chart shows the
fall in Revenue over the next four years
the question is what went wrong so first
biggest challenge for the company was
its contract with its client basically
during 2015 to 19 period Indian solar
projects did not pick up so s SW solar
was increasingly bidding for Global
contracts in Middle East Africa and so
on this pie chart shows the fi9 aut book
where India had only 17.3% stake
majority of companies aut book was from
international business now the challenge
with the business model was that the
contracts Sterling and Wilson was
signing included everything right from
procurement of solo module to
engineering and construction and
operation and maintenance and the
contract price was fixed this meant that
if there were any cost overruns due to
delay in construction or increase in
price of raw material the company had to
Bear all of them from its own pocket and
Company was already operating on single
digit margins this is actually the
biggest risk with EPC companies the
project cost are very high and many
companies are already growing their
business by taking debt so any increase
in Project cost can result in sharp fall
in profitability and high debt can kill
the business in case of s SW solar that
did not anticipate increase in cost
because during that time solo module
prices were falling due to Giant
capacity addition by China and
Technology Improvement and Company had a
reputation to finish the projects before
time so they worked on fixed contract
basis that was actually beneficial for
the company and then in 20120 COD hit
the world it resulted in labor shortage
and sharp delay in Project completion on
top of this solar module prices went up
significantly as a result company’s cost
went up sharply company had to cancel
the contract due to this unforce
circumstances now s SW solar was right
on their side but their client said that
they should have planned contingencies
and should have done better risk
management so s SW solar clients did not
make the payment for unfinished sites
and sued s SW solar in the court as a
result company started defaulting on
loan payment and that further resulted
in credit derating it further increased
the cost of the borrowing even s SW
solar suited its client for non-
payments and that was the key trigger
for Sharp fall in revenues then what
resulted in Improvement in situation so
in 2022 Reliance industry subsidi
Reliance new energy acquired 40% stake
in the company for 375 rupe per share
this was the first sign of Revival in
company’s business by that time the
litigation cases were increasingly
coming to their closure with s SW solar
winning most of them now something very
interesting happened during this phase
company started focusing on the domestic
Indian solar Market that started growing
exponentially moreover in domestic
contracts the solar module procurement
was mainly the responsibility of clients
rather than the EPC company so after
Reliance backing and focus on domestic
Market company’s auto book again started
growing in 2022 company received one of
the largest domestic EPC contract of 1.6
gwatt by ntpc in 2023 it achieved a
second consecutive Mega order of of 1.5
gwatt from ntpc company also got the
loan from financial institution as a
result its business started improving
fast forward today as of March 24
company has an unexecuted order book of
around 8,000 CR this order book was
around 4,900 CR in last year March 23 so
aob book has grown around 60% out of
this around 85% order are from domestic
Indian market mind you in 2019 Indian
Autobook was just around 177% as of f 24
company’s revenues are around 3,000 CR
so its Autobook is more than 2.5 times
its current revenue and it’s growing
exponentially and management has given a
guidance that fi25 order book would be
higher than f24 this gives a good
picture on company’s Topline growth in
the near term as far as debt is
concerned company’s fi23 debt was 1,966
CR that is now reduced to just 116 CR as
a result company’s interest component
that was significantly eating the profit
has fallen significantly the question is
why am I covering this company now it’s
because I was closely tracking this
company and it was recovering from the
challenges but was still not profitable
at profit before tax level it was
consistently posting losses due to
negative operating profits and high
interest however in Q4 of f24 that is
the latest result company has posted
positive AA and fall in interest that
has resulted in first quarter of profits
for the company after many years as a
result right after Q4 numbers last week
company share pric has jumped around 20
20% even before I could share this video
with you all having said this company
share price is still trading below its
IPO price of 2019 and if company can
continue to grow its business it share
price can significantly grow in the
future currently company commands a
market cup of around 16,000 CR and uh
has got price to sale of
5.26 now we can’t look at PE Ratio or EV
TOA due to losses in the past just to
give an idea another very prominent
player in solar EPC space is Vari
renewable which is trading at a price to
sale 43 on conservative side management
has given a growth guidance of around 15
to 20% CGR rate and this is excluding
the orders from Nigeria and Reliance so
please note that out of 8,000 CR of its
order book uh it does not include your
Nigeria and Rel Reliance order so
recently company has been awarded order
worth $2.2 billion from Nigeria which is
not yet signed once that is signed it
would significantly boost company’s
order book although it would be one time
so here please note that EPC businesses
with very lumpy in nature which is again
a key risk today everything is looking
great due to high demand for solar EPC
projects but this growth might fluctuate
based on order book there’s also a
significant order expected from Reliance
industry so I hope you got a fair idea
of opportunity and the turnaround Story
one thing I forgot to mention is in
December 23 quarter uh the company
raised around 1,500 CR via qip where
Reliance diluted it stake at around uh
365 rupe uh and mind you today’s share
is trading at around 680 rupe company
got a very response that included FIS
like Goldman Sachs that has further
increased allocation in the company they
I included nepon and AD AMC that again
Boost Retail investors confidence so in
this video we discuss the rise and fall
of s SW solar and now again compan is
trying to Rise From the Ashes like I
said this is a highrisk high reward bet
there is certainly a lot of opportunity
but it comes at a risk some of the key
risk include Delan project execution and
slowdown in order book growth but if
things work well s SW solar can be a
huge wealth creator
recently I got a chance to look at
research report by Nama and it has given
a buy call on the company with a Target
price of 850 rupe so in spite of 20%
jump in share price last week there’s a
very good wealth creation potential
provided company execute the projects as
per plan I hope you would appreciate
this research it took me a lot of time
to collate the information and present
in just 105 minute for more such
informative content on stock market and
person Finance in general you can
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get the detailed in the pin comment now
tell me in the comments what do you
think about the potential in s solar is
it worth taking a bet I’ll see you next
video till then take care

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This solar company has potential to create massive wealth for investors in FY25 | SW Solar Analysis

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