Key highlights from Waaree Renewable Technologies Ltd (534618) Q4 FY24 Earnings Concall
- Renewable Energy Growth
- Government initiatives like incentives, subsidies promoting renewable energy adoption.
- Renewable energy capacity addition of 18.48 GW in FY2023-24, 21% increase from previous year.
- Utility-scale renewable energy tenders exceeded 50 GW target, reaching 69 GW in FY24.
- Energy storage capacity target of 12 GW by FY24, 70 GW by FY30.
- Solar Energy Dominance
- India’s installed renewable energy capacity at 143.64 GW as of March 31, 2024.
- Need to add 310 GW in next 6 years, averaging 50 GW annually.
- Solar installations accounted for 16 GW of total renewable energy capacity addition in FY2023-24.
- Total installed solar capacity around 82 GW, leading India’s renewable energy landscape.
- Company Performance
- Unexecuted order book of 2.3 GW peak, successfully executed over 700 MW plus in FY24.
- Revenue from O&M at INR10.42 crores in FY24.
- Secured significant orders totaling 1.8 GW peak for ground-mounted solar projects.
- Strong financial performance with revenue growth of 149%, EBITDA growth of 147%, PAT growth of 167% in FY24.
- Earlier missed invoicing around 100 MW, impacting Q4 revenues to some extent.
- O&M portfolio reduced by 400 MW as some contracts ended.
- New 900-1000 MW O&M orders to start after completing EPC portion.
- Execution Capacity
- Company has enough capacity to execute over 2.3 GW order book and take on additional orders.
- EPC is a platform business where resources can be scaled based on order intake.
- For orders over 500 MW, execution typically takes 9-18 months depending on complexity.
- Smaller orders under 100 MW can be executed faster.
- Order Book Breakdown
- Unexecuted order book of 2.3 GW with average realization of INR1.2-1.3 cr/MW.
- Turnkey projects realize INR3.25-3.5 cr/MW, balance of system projects INR0.8-1.5 cr/MW.
- Current order book has 15% volume from PSUs but 35% value share.
- Order Pipeline
- L&T currently has 13 GW pipeline visibility, up from 10 GW in previous quarter.
- Typical conversion rate from pipeline to orders is 25-30%.
- Pipeline includes utility-scale IPPs, order pipeline doesn’t include PSU orders yet.
- Company is open to target both IPPs and PSUs going forward.
- Order Inflows
- In last quarter, received biggest order of 450 MW from NTPC.
- Market has seen 16 GW of tender/order inflows in just last quarter.
- Strong renewable energy tender pipeline supports robust growth outlook.
- FY25 Execution Plan
- Plan to execute 1.8-2 GW in FY25, doubling over previous year’s execution.
- Revenue guidance depends on execution against order book.
- New Opportunities
- Solar rooftop projects (<5 MW) emerging as significant opportunity.
- Storage expected to be big with 47 GW pipeline from round-the-clock tenders.
- Green hydrogen/ammonia – 5 MMTPA target presents renewables integration scope.
- 5 GW solar parks allocated for green hydrogen production.
- Raw Material Procurement
- As an EPC player, company is not significantly impacted by raw material costs.
- For turnkey projects with modules, procures from manufacturers at arm’s length.
- For balance of system projects without modules, no major raw material dependency.
- Margins and Manpower
- Expects sustainable double-digit margins around 15% level.
- Higher volumes can provide some upside to margins.
- Will hire more engineers/designers and ground manpower as per project needs.
- Manpower costs expected to remain stable as a percentage of revenues.
- Green Hydrogen
- Had a pilot project with PSU but no major updates yet.
- As opportunities arise, company aims to deliver EPC component for green hydrogen projects.
- Aligns with group’s existing presence in hydrogen business.
- Execution Shortfall
- Executed 704 MW against internal target of 900-950 MW for FY24.
- EPC is a long-haul business with project preparatory work.
- Shortfall doesn’t imply non-performance by the company.
- EBITDA Margins
- Maintains double-digit sustainable EBITDA margins of around 15%.
- Higher than single-digit margins of some competitors in EPC business.
- Did not disclose reasons for superior margin profile over peers.
- Receivables and Order Book Mix
- Receivables were around 40% of FY24 revenues, including retention money component.
- Working capital cycle involves initial advances, progressive milestones, and 5-10% retention for 6-12 months.
- Around 70% of current 2.3 GW order book is without modules.
- Plan to execute entire 2.3 GW order book in-house.
- 30% of orders also include supply of modules.
- No intentions to subcontract any part of the order book.