Motilal Oswal Maintains Buy Rating on ACME Solar, Targets Rs 341

ACME Solar Research Report

Company Overview

ACME Solar, a prominent player in the solar energy sector, boasts a significant portfolio of 8.1GW, comprising 3GW of operational capacity and 5.1GW under construction. Approximately 78% of this capacity is backed by Power Purchase Agreements (PPAs), providing strong earnings visibility.

Business Performance

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The company's operational capacity is expected to increase from 2.5GW at the end of FY25 to 5.5GW by the end of FY28, driving EBITDA and APAT compound annual growth rates (CAGR) of 74% and 76%, respectively, over the FY25-28 period. ACME plans to accelerate the deployment of Battery Energy Storage Systems (BESS) linked to its Floating Distributed Renewable Energy (FDRE) projects, leveraging its existing operational sites.

BESS Deployment

ACME aims to commission 2GWh of BESS capacity in 4QFY26 and another 2GWh in 1QFY27, with a broader goal of 10GWh by the end of CY27 under 25-year PPAs. This potential BESS ramp-up has not been incorporated into current estimates, representing a potential earnings upside (EBITDA guidance of INR1.7 billion/GWh assuming INR5/unit arbitrage).

Execution and Outlook

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ACME has secured transmission connectivity for almost all of its 5.1GW under-construction capacity and maintains a 7.5GW connectivity inventory (1.3GW secured, 6.2GW applied), providing a competitive advantage when bidding for future projects and limiting execution delays.

Investment Recommendation

We assign an Enterprise Value-to-Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) multiple of 9.5x to FY28E EBITDA, adjusting for net debt to derive a Target Price (TP) of INR341. This represents a 34% potential upside.