'Too cheap to ignore': Jefferies initiates coverage on Emmvee Photovoltaic, sees 70% upside

India's solar manufacturing story is entering a phase of rapid scale-up, and Jefferies believes select domestic players are well placed to benefit from this transition. In a new report, the global brokerage has initiated coverage on Emmvee Photovoltaic Power with a Buy rating and a target price of Rs 320, a 70% upside from current levels, citing strong growth visibility, policy support and attractive valuations.

Jefferies expects India's annual solar installations to grow at a 24% CAGR between FY25 and FY28, driven by falling solar tariffs, rising power demand and the increasing adoption of battery energy storage systems.

According to the brokerage, solar power tariffs have consistently stayed below the cost of new thermal power over the past four years, making solar the preferred choice for utilities and industrial users.

The recent discovery of solar-plus-storage tariffs in the range of Rs 3-3.5 per unit has further strengthened the case for renewables. Jefferies notes that these tariffs imply battery storage costs of Rs 4.5-5 per unit, which still compares favourably with marginal thermal power tariffs of Rs 5.4-5.8 per unit. Importantly, solar-plus-storage contracts lock in prices for 25 years, unlike thermal power where costs rise annually.

Against this backdrop, Jefferies sees solar emerging as the dominant renewable energy source in India. It estimates annual solar installations to rise to 65 GW by FY28 from about 34 GW in FY25.

Policy support remains a key driver for domestic manufacturers. Government rules such as the Approved List of Models and Manufacturers (ALMM) and domestic content requirements for public sector projects have effectively reserved a large part of the market for Indian manufacturers.

This has led to a shortage of domestic solar cells, pushing up module prices and improving profitability for local players. Jefferies expects similar policy protection to eventually extend to upstream segments like ingots and wafers.

Emmvee, according to the brokerage, stands out due to its early move into high-efficiency TOPCon cell technology. The company is among the first in India to operationalise large-scale TOPCon cell capacity, with 3 GW already running since September 2024. Its collaboration with Germany's Fraunhofer Institute and the use of German-sourced equipment are expected to keep operating costs competitive.

The company is also expanding aggressively. Jefferies estimates Emmvee's cell and module capacity to rise to 8.9 GW and 16.3 GW respectively by FY27. Unlike some peers, Emmvee is staying focused on the core solar value chain and does not plan to diversify into batteries or inverters.

While Jefferies acknowledges that domestic oversupply could pressure margins over the medium term, it expects industry profitability to stabilise by FY28 as inefficient capacities shut down and stricter efficiency norms come into force. Even after normalisation, Emmvee is expected to deliver high-teen returns on capital.

On the numbers, Jefferies forecasts a 56% EBITDA CAGR between FY25 and FY28, supported by rising volumes despite some margin compression. At current levels, the stock trades at about a 50% discount to peers, prompting Jefferies to value Emmvee at 9x forward EV/EBITDA.

Risks, according to the brokerage, include weaker-than-expected domestic solar demand and the possibility of all announced capacities becoming operational.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)