Insolation Energy: This Stock Has Run Up 4200% In 18 Months. More To Come?

Over the past 12-18 months, there has been significant interest in initial public offerings from small and medium enterprises. Insolation Energy Ltd. has particularly stood out, achieving remarkable growth with a 1,200% return over the past year. The company's IPO debuted in September 2022 at Rs 38 per share. Today, the stock is trading at Rs 1,644 per share, reflecting an stellar return of 4,200%.

Founded in 2015, Insolation Energy is a solar panel and module manufacturer. It has set up a fully automatic solar PV module manufacturing plant in Jaipur

With a market capitalisation of over Rs 3,300 crore, the company has a solar panel manufacturing capacity of 700 megawatts as of FY23. The company also has a module manufacturing capacity of 250 megawatts, expected to reach around 1,000 megawatts with a 70% average capacity by FY24.

Insolation Energy aims to increase its capacity to 1,200 megawatts by 2025 and targets an annual sales value of Rs 1,000 crore. It is also setting up its own solar cell line with a capacity of 600 megawatts.

The company's revenue more than doubled, jumping 164% to Rs 738 crore in FY24, according to its exchange filing.

Revenue has grown at a 20% CAGR over the past three years, while profit levels have remained largely flat.

As of FY23, around 92% of its total revenue came from the sale of manufactured products, while the rest came from trading sales.

For the past three financial years, on average, 43% of the company's total costs constituted raw materials, with a substantial amount of solar cells being imported from China.

Government Push

On January 22, Prime Minister Narendra Modi launched the PM Surya Ghar Scheme to provide a subsidy of up to Rs 78,000 per household for the installation of solar panels. The scheme has an outlay of Rs 75,021 crore. Currently, it incentivizes up to Rs 30,000 for each two-kilowatt installation and Rs 18,000 for the third kilowatt.

Application for the subsidy can be made through the National Portal on the PM Surya Ghar Scheme. Apart from household use, excess electricity can be provided to the national grid, leading to additional compensation.

This could help boost sales for Insolation Energy.

Insolation Energy avails benefits under the Export Promotion Capital Goods Schemes.

As per licensing requirements under the scheme, the company has to export goods of a defined amount. If the company fails to do so, it would have to pay the government a sum equivalent to the duty benefit enjoyed by them, along with interest.

While China is the world’s largest manufacturer of solar modules, it is also facing several challenges, mainly trade tensions with the US and EU. These challenges are creating an opportunity for Indian solar module manufacturers to gain market share, as Waaree Energies Ltd. mentioned in its Draft Red Herring Prospectus in 2023.

The US and EU are currently implementing regulations to promote the use of renewable energy, including solar energy, which creates a large market for solar modules, as mentioned in Waaree Energies' statement.

While India's solar module manufacturing capacity is expected to reach 90 GW to 95 GW by 2028, domestic demand is estimated at 40 GW to 45 GW in the same year, according to Waaree Energies. This indicates that India will have a surplus of solar modules that can be exported to other countries.

The company has guided for double consolidated revenue by FY25. It plans to expand its solar panel manufacturing capacity to 3,000 MW and aluminum frame manufacturing to 6,000 metric tonnes per annum in FY26.

Insolation Energy is also one of the approved solar module manufacturers in India as per guidelines set by the government, which entails compliance with the Bureau of Indian Standards and having a minimum module efficiency according to the given standards.