ACME Solar shares surged after brokerage firms Motilal Oswal and JM Financial initiated coverage with bullish ratings. Motilal Oswal set a target price of INR 330, implying a 59% upside from its last close of INR 207.60 (as of February 4, 2025). JM Financial was slightly more conservative, with a target of INR 262, reflecting a 26% potential gain.
Stock Performance After Motilal Oswal’s Rating on ACME Solar
Following Motilal Oswal’s rating on ACME Solar shares jumped nearly 10% on 5 February, hitting an intraday high of INR 228.50. The stock, which was listed on 13 November 2024, has experienced volatility—peaking at INR 292.40 on 4 December 2024, and hitting a low of INR 167.55 on 28 January 2025.
At 03:10 PM, ACME Solar was trading at INR 227.50, up 9.18%, even as the Nifty Index declined by 0.16% to 23,700.
Why Are Analysts Bullish?
1. Undervalued Compared to Peers
Motilal Oswal sees a pricing gap between ACME Solar and industry rivals. NTPC Green trades at 14x FY28E EV/EBITDA, while ACME is at 11x, despite a comparable growth trajectory. Other renewable players, JSW Energy and Tata Power, command even higher multiples at 15x.
2. Strong Portfolio in a High-Growth Sector
ACME Solar operates a 7 GW renewable energy portfolio across solar, wind, hybrid, and firm & dispatchable renewable energy (FDRE) projects. The company has an operational capacity of 2.5 GW, with an additional 4.4 GW under development.
Moreover, 86% of ACME’s capacity is backed by power purchase agreements (PPAs) with SECI, NTPC, and NHPC, reducing default risks.
3. Robust Earnings Growth
Motilal Oswal expects 52% EBITDA CAGR from FY24 to FY27 as ACME scales operations. The company secured 1.9 GW in fresh orders for FY25, setting up strong revenue growth.
JM Financial predicts an even faster pace, estimating 55% revenue CAGR and 57% EBITDA CAGR from FY24-FY28. EBITDA margins could expand from 82.6% in FY24 to 88.6% by FY28, driven by a better project mix.
4. Secured Revenue Streams
ACME Solar has 100% of FY26 capacity and 83% of FY27 capacity under PPAs, ensuring predictable cash flows. Grid connectivity for all projects under construction has also been secured, reducing execution risks.
5. Focus on High-Return, Complex Projects
ACME is prioritizing FDRE and hybrid energy projects, which yield higher internal rates of return (IRR) than traditional renewable projects. The company’s wind energy expansion further differentiates it from NTPC Green, which remains primarily focused on solar.
6. Capital to Support Growth
Funding will come from a mix of project debt, operating cash flow, and refinancing. ACME already secured debt for 1.7 GW of projects and expects cash flow from operations to sustain additional funding needs.
Key Risks to Watch
Despite the optimism, analysts highlight some risks:
- PPA Delays – Any slowdown in signing new agreements could impact revenue forecasts.
- Market Competition – Increased competition in solar and wind projects may pressure margins.
- Execution Risks – Project delays or higher-than-expected capex could strain financials.
- Weather Dependence – Solar and wind generation fluctuates, potentially affecting earnings stability.
Conclusion
ACME Solar is gaining traction as a leading renewable energy player in India. With a solid growth pipeline, stable PPAs, and bullish financial projections, it has drawn favourable coverage from major brokerages. While competition and execution risks persist, the company’s focus on high-IRR projects, diversified portfolio, and strong funding strategy support its long-term outlook.
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