Waaree Energies Faces Jefferies Downgrade Despite Impressive 25% Stock Surge

Jefferies has made a significant move, downgrading Waaree Energies Ltd. from a ‘hold’ to an ‘underperform’ rating, despite the company showcasing impressive growth in its fourth quarter and optimistic projections for the financial year 2026. The downgrade comes on the heels of a 25% surge in the stock price over the last month, which Jefferies believes has already factored in much of the potential near-term gains.

Strong Fourth Quarter Performance

Waaree Energies delivered robust results in its fourth quarter, with revenue climbing 36% year-on-year to reach Rs 4,000 crore. The company also reported a remarkable 121% increase in EBITDA, soaring to Rs 920 crore, surpassing market expectations. The profit for the quarter hit Rs 620 crore, reflecting a 140% year-on-year growth. This impressive performance was primarily driven by strong volume increases in the EPC segment, which helped mitigate a 22% decline in realizations. Consequently, margins improved to 6.3 cents/Wp, up from 5.9 cents/Wp the previous year.

Revenue: Rs 4,000 crore
EBITDA: Rs 920 crore
Profit: Rs 620 crore
Margin Improvement: 6.3 cents/Wp

Future Growth Prospects

Looking ahead, Waaree’s management is optimistic about fiscal 2026, forecasting over 100% EBITDA growth. This growth is anticipated to stem from increased capacity and stronger contributions from international markets, particularly the United States. The utilization rate for their 1.4GW PERC line has reached an impressive 90%, and the company maintains a healthy order book visibility of approximately 2–2.5 years.

In addition to this, Waaree is planning to enhance its operational footprint by doubling its capacity in the U.S. and expanding its Indian operations to 22.5GW. A notable 3.2GW plant is in the pipeline, with significant production ramp-up expected in the latter half of this fiscal year.

Caution Amidst Optimism

Despite these promising indicators, Jefferies has raised several red flags. The brokerage noted that high module inventories in the U.S. could lead to a decline in import volumes if new tariff protections are not implemented by fiscal 2026. In India, the reinstatement of the Basic Customs Duty starting June 2026 and less favorable economics for non-DCR projects might dampen demand as we move into the second half of financial year 2027.

Moreover, Waaree’s order book witnessed a 5% decline quarter-on-quarter, dropping to 25.6GW, with reduced contributions from overseas markets. While Jefferies acknowledges a potential profit boost in financial year 2027, they caution that much of the short-term upside has already been absorbed by the recent stock price rally.

Conclusion

The revised target price for Waaree Energies has been adjusted to Rs 2,100 from Rs 2,030, reflecting a long-term confidence in the company’s growth trajectory. However, this downgrade is a signal of caution, highlighting stretched valuations and emerging challenges within the sector. As investors consider their options, it’s crucial to weigh these factors against the backdrop of Waaree’s growth ambitions and market dynamics.

For those keeping a close eye on stock recommendations, Waaree Energies remains a topic of interest alongside others like Tata Consumer and LTIMindtree.