Alpex Solar Q3 FY26: Robust Growth Momentum Continues Despite Margin Pressure

Trading at ₹914.00 as of February 10, 2026, the stock has declined 0.69% from the previous close, reflecting investor caution despite the strong growth trajectory. The company's shares remain 36.95% below their 52-week high of ₹1,449.70, though they have rallied 84.65% from the 52-week low of ₹495.00, indicating significant volatility over the past year.

The standout feature of Alpex Solar's Q3 FY26 performance was the extraordinary revenue momentum, with net sales reaching an all-time quarterly high of ₹648.08 crores, marking a 23.93% sequential increase from Q2 FY26's ₹522.92 crores and a remarkable 245.40% year-on-year jump from ₹187.63 crores in Q3 FY25. This aggressive topline expansion underscores the company's success in capturing market share within India's rapidly expanding solar and electrical equipment sector.

Financial Performance: Strong Growth Masks Margin Concerns

Whilst revenue growth remained robust through Q3 FY26, a detailed examination of the quarterly trend reveals emerging pressure on profitability metrics. The company's operating margin (excluding other income) contracted to 13.95% in Q3 FY26 from 14.90% in Q2 FY26 and 16.46% in Q1 FY26, continuing a concerning downward trajectory from the 19.62% margin achieved in Q3 FY25. This 570 basis point year-on-year margin compression suggests intensifying competitive pressures or rising input costs that are outpacing the company's pricing power.

The PAT margin similarly declined to 8.37% in Q3 FY26 from 10.07% in the previous quarter and 12.47% in the year-ago period, representing a 410 basis point year-on-year erosion. This margin compression is particularly noteworthy given the company's ability to maintain strong absolute profit growth, suggesting that Alpex Solar is prioritising market share gains over near-term profitability optimisation.

On a nine-month basis for FY2026 (April-December 2025), Alpex Solar reported cumulative net sales of ₹1,551.32 crores and consolidated net profit of ₹149.22 crores. When compared to the full-year FY2025 figures of ₹780.00 crores in revenue and ₹83.00 crores in profit, the company has already surpassed its previous annual performance with an entire quarter remaining in the fiscal year.

Operational Dynamics: Scaling Challenges Emerge

A granular analysis of Alpex Solar's cost structure reveals several operational challenges accompanying the company's rapid expansion. Interest expenses surged to ₹6.49 crores in Q3 FY26 from ₹3.37 crores in Q2 FY26, representing a 92.66% sequential increase. This sharp rise in financing costs reflects the working capital intensity of the company's growth trajectory, as evidenced by the substantial increase in current assets from ₹170.99 crores in FY2024 to ₹357.39 crores in FY2025.

The company's return on equity stands at a healthy 27.65% on an average basis, demonstrating strong capital efficiency despite the margin pressures. This elevated ROE, significantly above the 15-20% threshold typically expected from quality businesses, indicates that Alpex Solar continues to generate attractive returns on shareholder capital. The return on capital employed (ROCE) of 27.43% on an average basis further reinforces the company's ability to efficiently deploy capital across its operations.

Employee costs remained relatively stable at ₹8.04 crores in Q3 FY26 compared to ₹6.98 crores in Q2 FY26, representing just 1.24% of revenue. This lean cost structure provides the company with operational flexibility, though it also raises questions about the sustainability of growth without commensurate investment in human capital.

Balance Sheet Strength: Moderate Leverage Profile

Alpex Solar's balance sheet reveals a company in rapid expansion mode. Shareholder funds increased substantially to ₹216.41 crores as of March 2025 from ₹133.03 crores in the previous year, driven by strong profit retention. The company's reserves and surplus grew from ₹108.55 crores to ₹191.93 crores, reflecting the accumulation of earnings given the absence of dividend payments.

Long-term debt stood at ₹14.47 crores as of March 2025, up from ₹4.47 crores in the prior year, resulting in a debt-to-equity ratio of 0.07—an exceptionally conservative leverage profile. The average debt-to-EBITDA ratio of 1.30 times and net debt-to-equity of 0.07 indicate that the company maintains significant financial flexibility to fund future growth initiatives without stretching its balance sheet.

Cash Flow Analysis: Investment Phase Strains Liquidity

The cash flow statement for FY2025 reveals the typical pattern of a rapidly growing company. Operating cash flow improved dramatically to ₹68.00 crores in FY2025 from a negative ₹8.00 crores in FY2024, demonstrating the company's improving ability to convert profits into cash. However, this positive operating cash generation was more than offset by investing activities, which consumed ₹81.00 crores during the year, primarily for capacity expansion and working capital investments.

The company raised ₹16.00 crores through financing activities in FY2025, resulting in a modest net cash inflow of ₹3.00 crores for the year. Cash and cash equivalents stood at ₹29.00 crores as of March 2025, up from ₹25.00 crores in the previous year, providing adequate liquidity for near-term operational requirements.

Industry Context: Solar Sector Tailwinds Remain Favourable

Alpex Solar operates in India's electrical equipment sector, with specific exposure to solar energy components—a segment benefiting from robust structural tailwinds. The Indian government's ambitious renewable energy targets, coupled with declining solar module costs and increasing grid parity, have created a favourable demand environment for solar equipment manufacturers.

The company's 245.40% year-on-year revenue growth in Q3 FY26 significantly outpaces the broader Other Electrical Equipment sector's 12.54% one-year return, suggesting that Alpex Solar is capturing disproportionate market share gains. This outperformance likely reflects the company's ability to secure large contracts, expand distribution reach, or introduce competitive products that resonate with customers.

Within its peer group, Alpex Solar commands a premium valuation at 28.18 times trailing twelve-month earnings, above the peer average of approximately 23 times. However, this premium appears justified by the company's superior ROE of 27.65%, which significantly exceeds the peer average of around 15%. The price-to-book ratio of 4.93 times, whilst elevated in absolute terms, remains below peers such as Shilchar Technologies (10.98x) and Websol Energy (7.75x), suggesting relative value on a book value basis.

Valuation Analysis: Premium Pricing Reflects Growth Expectations

At the current market price of ₹914.00, Alpex Solar trades at a trailing P/E ratio of 28.18 times, representing a significant premium to the broader market. The company's PEG ratio of 0.11 indicates that despite the elevated P/E multiple, the valuation appears reasonable relative to the company's exceptional growth trajectory. A PEG ratio below 1.0 typically suggests that a stock's growth rate justifies or exceeds its valuation multiple.

The enterprise value-to-EBITDA multiple of 19.05 times and EV-to-EBIT of 20.45 times reflect market expectations of continued strong earnings growth. The EV-to-sales ratio of 3.04 times, whilst elevated for a manufacturing business, aligns with the premium valuations accorded to high-growth companies in the renewable energy sector.

The proprietary valuation assessment categorises Alpex Solar as "EXPENSIVE", though this grade was recently downgraded from "VERY EXPENSIVE" in October 2025, suggesting that the recent stock price correction has brought valuations closer to reasonable levels. The stock currently trades 36.95% below its 52-week high, potentially offering a more attractive entry point for investors with conviction in the company's long-term growth story.

Shareholding Pattern: Promoter Stake Dilution and FII Interest

The shareholding pattern reveals notable changes in ownership structure over recent quarters. Promoter holding declined to 65.89% in December 2025 from 68.76% in March 2025, a reduction of 287 basis points. This dilution occurred between March and September 2025, with the promoter stake remaining stable thereafter. The reduction suggests either stake sales or dilution through fresh equity issuance, though the absence of dividend payments indicates that promoters are not monetising their holdings aggressively.

Foreign institutional investor (FII) holding has increased progressively from 0.73% in September 2024 to 3.42% in December 2025, indicating growing international investor interest in the stock. The sequential increase of 43 basis points in Q3 FY26 suggests continued accumulation by foreign investors. However, the complete absence of mutual fund holdings (0.00%) represents a significant concern, as domestic institutional investors have shown no interest in the stock despite its strong operational performance.

The total institutional holding of just 3.81% (FII plus DII) is exceptionally low for a company of Alpex Solar's size and growth profile. This minimal institutional participation could limit near-term stock liquidity and contribute to elevated volatility, as evidenced by the stock's 54.32% annualised volatility over the past year.

Stock Performance: Volatility Amid Strong Long-Term Gains

Alpex Solar's stock price performance has been characterised by exceptional volatility and strong long-term returns. Over the past year, the stock has delivered absolute returns of 29.34%, significantly outperforming the Sensex's 9.13% gain and generating alpha of 20.21 percentage points. The stock has also outpaced its sector, with the Other Electrical Equipment index returning just 12.54% over the same period, resulting in 16.80 percentage points of sector outperformance.

However, medium-term performance reveals significant volatility. The stock has declined 27.76% over the past three months and 27.60% over six months, substantially underperforming the broader market during this period. This recent correction has brought the stock from its 52-week high of ₹1,449.70 down to current levels, representing a 36.95% decline from peak valuations.

The recent one-week and one-month returns of 18.15% and 19.67% respectively suggest that the stock may be stabilising after the sharp correction, with investors potentially viewing current levels as attractive for accumulation. The stock's beta of 1.35 indicates that it is 35% more volatile than the broader market, classifying it as a high-beta stock suitable primarily for risk-tolerant investors.

Technical Analysis: Mildly Bearish Trend Persists

From a technical perspective, Alpex Solar currently exhibits a "MILDLY BEARISH" trend, which changed from "BEARISH" on February 6, 2026, at ₹864.20. The stock trades below all major moving averages, with the 5-day MA at ₹828.63, 20-day MA at ₹784.78, 50-day MA at ₹836.05, 100-day MA at ₹1,021.26, and 200-day MA at ₹1,050.03. This alignment of moving averages in descending order typically indicates sustained downward momentum.

Key technical indicators present a mixed picture. The MACD remains bearish on the weekly timeframe, whilst the RSI shows no clear signal on either weekly or monthly charts. Bollinger Bands indicate mildly bearish conditions on the weekly timeframe but turn bullish on the monthly view, suggesting potential for a trend reversal if the stock can sustain above current levels.

Immediate support exists at the 52-week low of ₹495.00, whilst immediate resistance is likely to emerge around the 20-day moving average of ₹784.78. Major resistance levels are positioned at the 100-day moving average of ₹1,021.26 and the 200-day moving average of ₹1,050.03, with the 52-week high of ₹1,449.70 representing strong long-term resistance.

Investment Thesis: Growth Potential Versus Execution Risks

The proprietary Mojo Score for Alpex Solar stands at 57 out of 100, placing it in the "HOLD" category. This score reflects a balanced assessment across four key parameters: valuation (fair), quality (average), financial trend (outstanding), and technical trend (mildly bearish). The score was downgraded from 70 (BUY) on January 6, 2026, primarily due to deteriorating technical indicators despite continued strong financial performance.

The investment case for Alpex Solar rests primarily on its exceptional revenue growth trajectory and strong return ratios. The company has demonstrated a five-year sales CAGR of 54.10% and EBIT CAGR of 108.68%, indicating sustained market share gains and operational leverage. The average ROCE of 27.43% and ROE of 27.65% significantly exceed cost of capital, creating substantial shareholder value.

However, several factors temper enthusiasm. The progressive margin compression from 19.62% in Q3 FY25 to 13.95% in Q3 FY26 raises questions about pricing power and cost management. The surge in working capital requirements and interest expenses suggests that growth is becoming increasingly capital-intensive. The complete absence of mutual fund holdings and minimal overall institutional participation of just 3.81% indicates that sophisticated investors remain cautious about the stock.

Outlook: What to Watch in Coming Quarters

The trajectory of Alpex Solar's stock price over the next 6-12 months will likely depend on the company's ability to stabilise or expand operating margins whilst maintaining revenue momentum. Investors should closely monitor whether the margin compression witnessed over the past four quarters represents a temporary phase of aggressive market share capture or a more structural challenge related to competitive intensity or input cost pressures.

The company's ability to attract institutional investor interest will be crucial for stock price stability and appreciation. The current minimal institutional holding of 3.81% creates liquidity constraints and amplifies volatility. A meaningful increase in mutual fund or insurance company holdings would signal growing confidence in the business model and potentially reduce stock price volatility.

From a valuation perspective, the stock appears reasonably priced at 28.18 times trailing earnings given the exceptional growth trajectory, as evidenced by the PEG ratio of 0.11. However, this valuation assumes continuation of the current growth momentum. Any significant deceleration in revenue growth or further margin erosion could quickly render current valuations expensive, potentially triggering a re-rating lower.