Motilal Oswal Bullish on Premier Energies: Initiates Coverage with 'Buy' and ₹1,000 Target
In a significant development for the renewable energy sector, domestic brokerage firm Motilal Oswal has initiated coverage on Premier Energies Ltd. (PEL), the country's second-largest integrated manufacturer of solar cells and modules. The firm has assigned a 'buy' rating to the stock and set a target price of ₹1,000 per share. This target indicates a substantial upside potential of 28.2% from the stock's latest closing price, offering a compelling investment opportunity for market participants.
Strong Fundamentals Drive Optimistic Outlook
Despite recent pressure on the stock, Motilal Oswal's positive stance is underpinned by Premier Energies' robust operational metrics. The brokerage highlights the company's aggressive capacity ramp-up, industry-leading backward integration, and a solid order book as key growth drivers. Amid rising global demand for renewable energy—fueled by increasing power requirements and supportive policy initiatives aimed at reducing fossil fuel dependence—the company is well-positioned for expansion.
Motilal Oswal projects that Premier Energies' module and cell manufacturing capacities will scale up significantly to 11.1 GW and 10.6 GW, respectively, beyond FY27. This marks a substantial increase from the current capacities of 5.4 GW for modules and 3.6 GW for cells as of January 2026, reflecting the company's ambitious growth trajectory in the solar energy landscape.
Superior Backward Integration and Competitive Edge
A critical factor in the brokerage's analysis is Premier Energies' superior backward integration compared to its listed peers. The company reported a cell-to-module ratio of 67% at the end of January 2026, which is significantly higher than competitors like Waaree Energies (24%) and Emmvee Photovoltaic Power (29%) at the end of the third quarter of FY26. This high level of integration has been instrumental in delivering an industry-leading EBITDA margin of over 30%, providing a strong competitive advantage in a cost-sensitive market.
Motilal Oswal emphasized that this operational efficiency is expected to continue, with the company projected to maintain one of the most integrated module manufacturing profiles in the industry. By the end of FY27, the cell-to-module capacity ratio is forecasted to reach 95%, which should support high utilization rates and sustain healthy margins over the long term.
Financial Metrics and Valuation Rationale
The brokerage also pointed to Premier Energies' impressive financial performance. In the first nine months of FY26, the company achieved an EBITDA margin of 30%, significantly ahead of its peers. Additionally, Return on Equity (ROE) and Return on Capital Employed (ROCE) stood at 54% and 32%, respectively, in FY25, outperforming Waaree Energies. This superior margin profile is attributed to high capacity utilization and a strong presence in the domestic cell segment, where limited capacity has kept profitability above normalized levels.
While commodity price volatility, particularly in silver, poses some concerns, Motilal Oswal has already factored in a moderated EBITDA margin of 20% by FY28, down from 28% in FY26. The firm stated, "At 10x FY28 EV/EBITDA, we believe valuations are reasonable, given the 30% EBITDA CAGR over FY25-28." This valuation suggests that the stock is attractively priced relative to its growth prospects.
Potential Catalysts and Market Context
Looking ahead, Motilal Oswal identified potential catalysts that could further boost Premier Energies' performance. Clarity on a US-India trade deal is seen as a key driver, as it could accelerate export growth and enable the company to establish a manufacturing base overseas. Such developments would enhance its global footprint and revenue streams.
On the market front, Premier Energies' share price has faced recent headwinds, closing lower for three consecutive months and losing 34% of its value during this period. This decline represents a 44% correction from its peak of ₹1,384 per share. However, despite the sharp fall, the stock continues to trade 74% above its IPO price of ₹450 per share. The stock debuted on Indian exchanges on September 3 at a massive 120% premium to its IPO price, with strong momentum initially before cooling off into a correction phase.
Investment Implications and Disclaimer
Motilal Oswal's initiation of coverage with a 'buy' rating underscores confidence in Premier Energies' growth story, driven by capacity expansion, operational excellence, and favorable industry trends. Investors are advised to consider these factors alongside broader market conditions and consult certified experts before making any investment decisions. This analysis is for educational purposes only, and views expressed are those of the brokerage, not necessarily reflective of market consensus.
