Target: ₹330
CMP: ₹228.20
ACME Solar Holdings (ACME) boasts a diversified portfolio of about 7GW of renewable capacity (operational + under construction + pipeline) spanning solar, wind, hybrid, and firm & dispatchable renewable energy (FDRE) projects. As of date, the company has an operational portfolio of around 2.5GW, while the total project pipeline, including under-construction projects, stands at around 4.4GW.
About 86 per cent of the company’s portfolio is contracted with central off-takers, including SECI, NTPC, SJVN, and NHPC, involving minimal counterparty risk.
We initiate coverage on ACME with a BUY rating and a TP of ₹330.
We believe ACME’s steep valuation discount vs NTPC Green is unsustainable and should narrow in the coming quarters. We further believe that NTPC Green’s premium valuation is largely a function of lower financing costs. However, this advantage is dented given that NTPC Green outsources both EPC and O&M for its projects.
Assuming a 10 per cent EPC margin and a 50 per cent O&M margin for solar projects, we estimate NTPC Green will lose 79 per cent of the interest cost savings over the project life. While we acknowledge NTPC Green’s superior financing cost, we highlight that ACME (as well as other players who undertake in-house EPC/O&M for projects) saves significant costs
