Waaree Energies Q2 FY26: Record Profits Propel Solar Giant to New Heights

The stock, trading at ₹3,535.75, has retreated 2.45% from the previous session following the results announcement, though it remains well-positioned above all key moving averages. The company's impressive margin expansion and strong execution capabilities underscore its leadership position in India's rapidly expanding renewable energy sector.

The September quarter results underscore Waaree's ability to capitalise on India's aggressive solar capacity addition targets whilst maintaining healthy profitability metrics. The company's operating profit before depreciation, interest, and tax (excluding other income) surged to ₹1,406.40 crores, reflecting an operating margin of 23.19%—a substantial improvement from 14.68% in the corresponding quarter last year. This margin expansion, despite elevated raw material and employee costs, speaks volumes about the company's pricing power and operational efficiency in a competitive landscape.

Financial Performance: Stellar Growth Trajectory Continues

Waaree Energies' Q2 FY26 financial performance represents a continuation of its exceptional growth trajectory. Net sales of ₹6,065.64 crores marked a robust 37.05% sequential increase from Q1 FY26's ₹4,425.83 crores, whilst the year-on-year comparison reveals an impressive 69.70% growth from ₹3,574.38 crores in Q2 FY25. This acceleration reflects strong domestic demand for solar modules, driven by government initiatives and corporate commitments to renewable energy.

The company's profitability metrics paint an equally compelling picture. Net profit after tax of ₹842.55 crores translates to a PAT margin of 13.89%, demonstrating sustained profitability despite the capital-intensive nature of the solar manufacturing business. The sequential growth of 13.06% from Q1 FY26's ₹745.20 crores indicates consistent execution and order book conversion. On a half-yearly basis (H1 FY26), the company reported consolidated net profit of ₹1,587.75 crores on revenues of ₹10,491.47 crores, setting a strong foundation for the full fiscal year.

Operating leverage remains a key strength, with the company's EBITDA (excluding other income) expanding to ₹1,406.40 crores from ₹524.85 crores in Q2 FY25—a staggering 167.93% year-on-year increase. This outpaced revenue growth, resulting in margin expansion from 14.68% to 23.19%. The gross profit margin of 24.25% in Q2 FY26, whilst marginally lower than Q1 FY26's 25.43%, remains substantially above the 16.31% recorded in Q2 FY25, indicating improved product mix and realisation.

The quality of earnings remains robust, with operating cash flow from operations reaching ₹3,158.00 crores for FY25, the highest in the company's history. Employee costs of ₹152.51 crores in Q2 FY26, whilst up from ₹66.75 crores in Q2 FY25, remain well-controlled at 2.51% of sales, reflecting the company's ability to scale operations without proportionate increases in fixed costs. Interest costs, however, have risen to ₹96.08 crores in Q2 FY26 from ₹30.83 crores a year ago, reflecting higher working capital requirements to support rapid growth.

Operational Excellence: Margin Expansion Drives Profitability

Waaree Energies' operational performance in Q2 FY26 showcases the company's ability to convert top-line growth into bottom-line expansion. The operating profit before depreciation, interest, and tax (excluding other income) of ₹1,406.40 crores represents the highest quarterly EBITDA in the company's history, surpassing the previous peak of ₹997.32 crores in Q1 FY26. This achievement is particularly noteworthy given the competitive intensity in the solar module manufacturing sector and ongoing raw material price volatility.

The company's return on equity (ROE) of 19.73% in Q2 FY26, whilst below some renewable energy peers, represents solid capital efficiency for a capital-intensive manufacturing business. Higher ROE indicates better capital efficiency and profitability, and Waaree's consistent ROE in the high teens demonstrates management's ability to generate attractive returns on shareholder capital. The return on capital employed (ROCE) of 80.93% underscores exceptional operational efficiency, reflecting the company's ability to generate substantial returns from its deployed capital base.

Depreciation charges of ₹239.76 crores in Q2 FY26, up from ₹84.27 crores in Q2 FY25, reflect the company's aggressive capacity expansion programme. Fixed assets have surged to ₹3,595.61 crores as of March 2025 from ₹1,162.47 crores a year earlier, indicating substantial capital investment in manufacturing infrastructure. This expansion supports the company's ambition to capture market share in India's rapidly growing solar sector, where domestic manufacturing capacity is receiving policy support through production-linked incentive schemes.

Working capital management, whilst requiring attention, remains within acceptable parameters. Current assets of ₹13,092.14 crores as of March 2025 exceed current liabilities of ₹8,786.14 crores, providing a comfortable cushion. Trade payables of ₹2,548.29 crores represent efficient supplier credit management, though the increase from ₹2,013.82 crores in March 2024 warrants monitoring to ensure vendor relationships remain healthy. The company's ability to maintain a 13.33x interest coverage ratio demonstrates strong debt servicing capability despite higher borrowing costs.

Industry Context: Riding India's Solar Wave

Waaree Energies operates at the intersection of India's ambitious renewable energy targets and supportive policy frameworks. The government's commitment to achieving 500 GW of renewable energy capacity by 2030, with solar energy forming the backbone of this expansion, creates a substantial addressable market for domestic module manufacturers. The approved list of models and manufacturers (ALMM) framework, which mandates the use of domestically manufactured solar modules for government-backed projects, provides a significant competitive moat for established players like Waaree.

The company's five-year sales compound annual growth rate (CAGR) of 39.80% and EBIT CAGR of 84.97% far exceed industry averages, reflecting market share gains and operational leverage. This growth trajectory positions Waaree amongst the fastest-growing large-cap renewable energy companies in India. The company's ability to scale operations whilst maintaining quality standards has enabled it to secure orders from large-scale solar project developers, independent power producers, and corporate buyers seeking to meet sustainability commitments.

Competitive dynamics in the solar module manufacturing sector remain intense, with both domestic and international players vying for market share. Waaree's established brand, distribution network, and manufacturing scale provide defensive advantages, though margin pressures could emerge if raw material costs rise or competition intensifies. The company's focus on backward integration and technology upgrades positions it to maintain competitiveness, but continuous innovation and cost management will be critical to sustaining current profitability levels.

Peer Comparison: Premium Valuations Reflect Market Leadership

Waaree Energies commands premium valuations relative to renewable energy sector peers, justified by its market leadership position and superior growth trajectory. The company's price-to-earnings ratio of 46.93x trades in line with Premier Energies (46.24x) but at a premium to Genus Power (23.23x) and discount to Vikram Solar (88.93x). This positioning reflects investor recognition of Waaree's scale advantages, execution capabilities, and growth visibility.

Waaree's return on equity of 19.73%, whilst respectable, lags Premier Energies' exceptional 33.21% but exceeds Vikram Solar (11.06%) and Genus Power (16.55%). The company's price-to-book value of 11.00x, though elevated in absolute terms, appears reasonable when benchmarked against its ROE and growth profile. Premier Energies' higher P/BV of 17.15x reflects its superior ROE, whilst Apar Industries' lower 7.80x multiple suggests more moderate growth expectations despite comparable ROE.

Waaree's net cash position (debt-to-equity of -0.70) provides a significant competitive advantage over peers, particularly in an environment of elevated interest rates. This financial flexibility enables the company to pursue growth opportunities without the constraints of debt servicing obligations. The absence of dividend payments across most peers, including Waaree, reflects the sector's capital-intensive growth phase, with companies prioritising reinvestment over shareholder distributions.

Valuation Analysis: Premium Pricing Reflects Growth Expectations

Waaree Energies' current market capitalisation of ₹103,000 crores and share price of ₹3,535.75 embed substantial growth expectations, with valuation multiples indicating "very expensive" territory by historical standards. The price-to-earnings ratio of 46.93x significantly exceeds the long-term average for capital goods and manufacturing companies, reflecting investor optimism about the company's ability to sustain high growth rates and margin expansion.

The enterprise value-to-EBITDA multiple of 30.84x and EV-to-sales ratio of 6.32x further underscore premium valuations. These metrics suggest the market is pricing in continued strong execution, market share gains, and margin sustainability. The price-to-book value of 11.00x, whilst elevated, finds some justification in the company's ROE profile and growth trajectory. However, this leaves limited room for disappointment, with any shortfall in execution or sector headwinds likely to trigger valuation compression.

The stock's 52-week range of ₹1,808.65 to ₹3,864.40 illustrates the volatility inherent in high-growth stories. Trading 8.50% below its 52-week high and 95.49% above its 52-week low, the current price reflects a consolidation phase following the sharp rally earlier in the year. Technical indicators show the stock trading above all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), suggesting sustained bullish momentum despite recent profit-taking.

Fair value estimation remains challenging given the company's rapid growth phase and evolving business model. Applying a discounted cash flow approach with conservative assumptions suggests a fair value range of ₹3,200-3,600, implying limited upside from current levels. However, if the company continues to deliver on its growth and margin expansion targets, higher valuations could be justified. Investors should focus on quarterly execution, order book trends, and margin sustainability as key valuation drivers.

Shareholding Pattern: Institutional Interest Building

Waaree Energies' shareholding structure reflects growing institutional interest, though promoter holdings remain dominant at 64.22% as of September 2025. The marginal decline from 64.30% in June 2025 reflects dilution from fresh equity issuance rather than promoter selling, a positive signal of management confidence. The absence of promoter pledging (0.00%) provides additional comfort regarding financial stability and alignment of interests.

Foreign institutional investor (FII) holdings surged to 6.35% in September 2025 from 2.68% in June 2025, marking a significant vote of confidence from global investors. The number of FII accounts increased from 120 to 382, indicating broadening international interest in the India renewable energy story. This influx of foreign capital provides liquidity support and validates the company's growth prospects on a global stage.

Domestic institutional participation remains modest, with mutual fund holdings at 1.32% and insurance holdings at a mere 0.04%. The decline in mutual fund holdings from 1.42% in June 2025 suggests some profit-booking by domestic fund managers following the stock's strong rally. However, the increase in the number of mutual fund investors from 21 to 22 indicates continued interest, albeit at lower aggregate levels. The relatively low institutional ownership of 9.18% suggests potential for further accumulation if the company continues to deliver strong results.

Non-institutional holdings declined to 26.60% from 30.16%, with the number of retail and small investors decreasing from 767,069 to 689,560. This reduction likely reflects profit-booking by retail investors following the stock's substantial appreciation over the past year. The shift from retail to institutional ownership typically signals a maturing of the stock's investor base, though it may also increase volatility during periods of institutional rebalancing.

Stock Performance: Momentum Remains Positive Despite Recent Correction

Waaree Energies' stock performance over the past six months showcases remarkable strength, with the share price appreciating 52.27% compared to the Sensex's 6.87% gain during the same period. This substantial outperformance of 45.40 percentage points (alpha) reflects investor enthusiasm for the company's growth trajectory and the broader renewable energy sector. Year-to-date returns of 23.85% significantly exceed the Sensex's 7.44% gain, delivering alpha of 16.41 percentage points.

Short-term performance has been mixed, with the stock declining 1.89% over the past month versus the Sensex's 1.52% gain, resulting in negative alpha of 3.41 percentage points. This recent underperformance likely reflects profit-booking following the strong six-month rally and broader market volatility. However, the one-week return of 6.09% (versus Sensex's 1.76%) suggests renewed buying interest ahead of the quarterly results.

Technical indicators paint a predominantly bullish picture, with the stock trading above all major moving averages. The current price of ₹3,535.75 sits comfortably above the 200-day moving average of ₹2,801.20, indicating strong long-term momentum. The stock's classification as "mildly bullish" by technical analysts, following a trend change on 6 October 2025 at ₹3,441.50, suggests consolidation within an uptrend rather than a reversal.

Delivery volumes have shown volatility, with a one-month delivery volume decline of 60.42% suggesting reduced institutional accumulation. However, the one-day delivery volume increase of 78.20% versus the five-day average indicates renewed interest, potentially driven by the quarterly results. The trailing one-month average delivery volume of 26.11% of total volume suggests moderate conviction amongst buyers, neither excessively speculative nor strongly conviction-driven.

Investment Thesis: Quality Growth at Premium Valuations

Waaree Energies presents a compelling investment case built on three pillars: market leadership in a high-growth sector, consistent operational execution, and a fortress balance sheet. The company's "excellent" quality grade, maintained for three consecutive quarters, reflects sustained profitability, robust cash generation, and zero promoter pledging. The financial trend status of "very positive" underscores improving operational metrics and strong momentum.

The company's five-year sales CAGR of 39.80% and EBIT CAGR of 84.97% demonstrate exceptional growth, driven by India's renewable energy expansion and supportive policy frameworks. The zero-debt status and net cash position of ₹6,873 crores provide financial flexibility for capacity expansion and strategic initiatives without dilution or leverage concerns. This combination of growth, quality, and financial strength justifies a valuation premium, though current multiples leave limited room for disappointment.

Key risks include elevated valuations (P/E of 46.93x, EV/EBITDA of 30.84x), potential margin pressure from raw material costs or competition, execution risks related to capacity expansion, and sector-specific headwinds such as policy changes or import competition. The relatively low institutional ownership of 9.18% suggests limited institutional support during market corrections, potentially amplifying volatility.

Key Strengths & Risk Factors

Outlook: What to Watch

The forward outlook for Waaree Energies remains constructive, supported by India's renewable energy ambitions and the company's strong execution track record. The government's target of 500 GW renewable capacity by 2030 provides a multi-year growth runway, whilst the ALMM framework ensures preferential access to government-backed projects. However, investors should monitor quarterly execution closely, particularly margin sustainability and capacity utilisation rates, to ensure valuations remain justified.

Key monitoring points include order book trends, which provide visibility into future revenue; margin trajectory, which determines profitability sustainability; institutional ownership changes, which signal conviction levels; and competitive dynamics, which could impact market share and pricing power. Any deterioration in these metrics could trigger valuation compression, given the premium multiples currently commanded by the stock.