Brokerages bet BIG on Premier Energies IPO; should you bid? Details inside

The latest grey market premium (GMP) of Premier Energies IPO, which opens for subscription today, was quoted around Rs 358, or 80 per cent, at the upper end of the issue price

Premier Energies IPO: Brokerages, including Reliance Securities, Deven Choksey, Anand Rathi Research, Choice, Geojit, Canara Bank Securities, and Swastika Investmart, remain broadly optimistic on the much-awaited initial public offering (IPO) of GEF Capital-backed solar photovoltaic (PV) cell manufacturer Premier Energies, which opens for public subscription today. 

Before we dive into the brokerages' reports, here are the key details of the public issue of Premier Energies:

Premier Energies IPO details

With this IPO, Premier Energies aims to raise Rs 2,830.40 crore by offering a fresh issue of 28,697,777 equity shares and an offer for sale, with promoters and investors offloading nearly 34,200,000 shares with a face value of Re 1 each. Premier Energies announced that it raised Rs 846.12 crore from anchor investors on August 26, 2024.  

 

The three-day subscription window for the Premier Energies IPO, which is available at a price band of Rs 427-450 with a lot size of 33 shares, ends on Thursday, August 29, 2024. 

Meanwhile, the unlisted shares of Premier Energies are commanding a strong premium in the grey market. According to several websites that track grey market activities, the latest grey market premium (GMP) of Premier Energies IPO was quoted around Rs 358, or 80 per cent, ahead of the upper end of the issue price, reflecting positive sentiment for the IPO.

Kfin Technologies is the registrar for the Premier Energies IPO, while Kotak Mahindra Capital, JP Morgan India, and ICICI Securities are the book-running lead managers of the public issue. 

Premier Energies, in the RHP papers, stated that it will utilise the net proceeds from the public issue towards funding the investment in its subsidiary, Premier Energies Global Environment, for part-financing the establishment of a 4 GW Solar PV TOPCon Cell and 4 GW Solar PV TOPCon Module manufacturing facility in Hyderabad.

Following the closure of the subscription window for the IPO, the basis of allotment of Premier Energies shares is scheduled for Friday, August 30, 2024, and the company's shares will be credited into demat accounts on Monday, September 2, 2024.

Premier Energies shares are likely to debut on the bourses—BSE, NSE—on Tuesday, September 3, 2024.

Should You Subscribe for the Premier Energies IPO? 

Reliance Securities - Subscribe 

Analysts at Reliance Securities have recommended a Subscribe rating on the Premier Energies IPO. The brokerage highlighted that the company has a long track record in the solar module manufacturing sector and experience in solar cell production with a 2.0 GW annual installed capacity, representing 28 percent of India’s total capacity in FY24. Premier Energies has developed India’s first solar manufacturer to produce a bifacial monocrystalline PERC solar cell based on the M10–182 mm x 182 mm format in FY22.

"Premier Energies has a diversified customer base with strong relationships both within India and overseas, along with a robust order book of Rs 5,926 crore. Given its consistent profitability and growth, we recommend subscribing to the issue," said Reliance Securities in its report.

Deven Choksey - Subscribe   

Deven Choksey has recommended a Subscribe rating on the Premier Energies IPO for investors. The brokerage believes that strategic initiatives, such as expanding into TOPCon technology and wafer production, alongside benefiting from India’s favourable domestic content requirements, position Premier Energies to capitalise on the growing solar energy market. With India targeting 500 GW of non-fossil fuel capacity by 2030 and expanding export opportunities to markets like the USA, Premier Energies plans to add a 1 GW TOPCon solar cell manufacturing plant by FY25 and further expand with an additional 4 GW TOPCon solar cell line and 4 GW TOPCon solar module line.

According to Deven Choksey, a robust order book of Rs 5,926.6 crore across DCR and non-DCR solar modules, solar cells, and EPC projects provides strong growth visibility for the near to medium term. "The company is valued at a P/E multiple of 87.7x FY24 adjusted EPS, which is in line with or cheaper than some similar companies, leading us to assign a 'Subscribe' rating for the IPO of Premier Energies," said the brokerage in its report.

Anand Rathi Research - Subscribe – Long Term   

Anand Rathi Research has recommended investors subscribe to Premier Energies for the long term. The brokerage noted that the company's P/E ratio is 87.7 times based on its FY24 earnings, though if we annualize the FY25 earnings, the P/E ratio significantly decreases to 25.5 times. Based on FY24 earnings, it has a market cap-to-sales ratio of 6.4 times. Anand Rathi Research believes that the company is well-positioned for future growth due to its strong market position, well-diversified customer base, and high technical expertise. "Therefore, we recommend a 'Subscribe – Long Term' rating to the IPO," said the brokerage.

Geojit - Subscribe for Medium to Long Term   

Analysts at Geojit remain bullish on the initial public offering of Premier Energies and have recommended investors subscribe to the public issue for the medium to long term. The brokerage noted that, "considering its extensive experience in module and cell manufacturing, backward integration strategies, export market exposure, and domestic manufacturing opportunities supported by various government policies and the China Plus One strategy, we assign a 'Subscribe' rating for the medium to long term."

Canara Bank Securities - Subscribe for Long Term   

Brokerage firm Canara Bank Securities has recommended subscribing to the Premier Energies IPO. According to Canara Bank Securities, this company’s issue is available at a P/EPS of 64.94x for FY2024, while the annualised P/E of FY2025 appears reduced to 18.97x, due to strong expectations of revenue potential from the order book and expansion plans at the same price. "We cannot compare the valuation of the company with peers as it is loss-making. Hence, we recommend subscribing to the IPO for the long term," said the brokerage in its report.

Choice - Subscribe   

Analysts at Choice remain optimistic about the Premier Energies IPO and have recommended investors subscribe to the public issue. The brokerage in its report stated that, "with pro-active regulations, policy support, and commitments towards renewable energy by the government, the domestic solar manufacturing market is likely to witness an accelerated growth trajectory in the medium term. Manufacturers like Premier Energies, with its dominant market position, are well-equipped to benefit from the market's expansion."

According to the brokerage, declining raw material prices have positively impacted the company’s financial performance during FY24 and Q1 FY25. Thus, any volatility in raw material prices would be negative for the company. "At the higher price band, Premier Energies is demanding an EV/Sales multiple of 4.8x, which seems attractive considering the prevailing valuation of a sole listed peer (which is loss-making). Thus, we assign a 'Subscribe' rating for the issue," said the brokerage in its report.

Swastika Investmart - Subscribe

Swastika Investmart has also shared positive views on the Premier Energies IPO and recommended investors bid for the public issue. According to the brokerage report, "while the company has faced challenges such as underutilised capacity and historical losses, its strong financial performance in FY24 indicates a positive trajectory. However, the intense competition within the solar manufacturing industry remains a key risk."

"The IPO's valuation of 64.93x P/E appears fully priced, reflecting the company's recent financial success. Despite the premium valuation, considering the other factors, we recommend a 'Subscribe' rating for this IPO," said Swastika Investmart.

About Premier Energies

As of March 31, 2024, Premier Energies Limited is ranked as the second-largest integrated solar cell and module manufacturer in India and also holds the position of the country's second-largest solar cell producer by annual installed capacity. Premier Energies' Restated Consolidated Revenue from operations during the quarter ended June 30, 2024, stood at Rs 1,657.36 crore and Rs 3,143.80 crore for the financial year 2023-24. As per data available in the Red Herring Prospectus, the Restated Profit attributable to Owners of the company during Q1 FY25 stood at Rs 198.16 crore and Rs 231.36 crore for FY24.