Solar stocks outshine with up to 1,318% return in 1 year. Who’s driving the bull run?

Smallcap solar company Waaree Renewable Technologies has been the top gainer in the solar pack with a mind-boggling annual return of 1,318%, followed by 561% gain in WAA Solar, 393% in Zodiac Energy and 236% in SJVN.

Other top multibaggers in the list include KP Energy, Adani Power, BF Utilities, Orient Green Power, CESC and JSW Energy.

Why solar stocks?

With the world shifting to renewable sources of energy, solar has surpassed wind to become the largest source of new electricity for the second year running on the world map. Back home, India is also on the cusp of shifting to a green energy ecosystem from a fossil fuels-dominated one by creation of green energy capacity of 340 GW by 2030 at a projected expenditure budget of Rs 20 lakh crore.

India’s solar generation has been increasing significantly over the last two decades, from just 0.01 TWh in 2000 to 113 TWh in 2023. India has now overtaken Japan to become the world’s 3rd largest solar power generator in 2023, shows data from global energy think tank Ember.

Solar’s contribution to electricity generation in India has increased from 0.5% in 2015 to 5.8% in 2023.

“It has been a theme which has played out extremely well and given the government support for solar panels, green energy and EV, I think this story will remain in the limelight for another maybe two or three years at least. So, within largecaps the best bets that one can really look at are Reliance Industries, Tata Power, Adani Green,” says independent market expert Hemang Jani.

HDFC Securities had recently recommended Tata Power as a long-term compounder while Yes Securities has a buy rating on Sterling and Wilson Renewable Energy with a target price of Rs 900.

“With the company’s (Sterling and Wilson) turnaround, significant deleveraging of the balance sheet, a robust order pipeline, and anticipated strong orders in the upcoming year, we are optimistic about the stock’s potential for re-rating from its current position,” Yes Securities said.

With increased domestic manufacturing and fresh impetus from the government, solar panel manufacturing companies are under investor radar. The government’s Pradhanmantri Suryodaya Yojana (PSY) which aims to install rooftop solar power systems for 10 million households in India can also be a significant opportunity in the making for solar players.

“In terms of companies, biggest beneficiaries are expected to be players engaged in panel manufacturing (Waaree Energies/Renewables, Premier Energies, Insolation), followed by players in Inverters (V-Guard, Havells), Wires (Polycab, RR Kabel, Finolex, V-Guard), Batteries (used for few off-grid solar power systems) and metering (HPL, Genus Power),” JM Financial’s Achal Lohade said.

(Data: Ritesh Presswala)

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