ACME Solar Holdings (ACME) is a company with a diverse portfolio of approximately 7GW of renewable energy capacity. This includes operational, under construction, and pipeline projects in solar, wind, hybrid, and firm & dispatchable renewable energy (FDRE) segments. Presently, ACME has around 2.5GW of operational projects and a total project pipeline of about 4.4GW. The majority of ACME’s portfolio, approximately 86%, is contracted with central off-takers such as SECI, NTPC, SJVN, and NHPC, which minimizes counterparty risk.
We are initiating coverage on ACME with a BUY rating and a target price of ₹330. We believe that ACME’s valuation discount compared to NTPC Green is unsustainable and expect it to narrow in the near future. While NTPC Green enjoys lower financing costs, the company outsources both EPC and O&M for its projects. In contrast, ACME and other players that handle in-house EPC/O&M for projects can save significant costs.
Considering a 10% EPC margin and a 50% O&M margin for solar projects, we estimate that NTPC Green will lose 79% of the interest cost savings over the project life. Despite NTPC Green’s advantage in financing costs, we believe that ACME’s approach of managing EPC and O&M in-house will be beneficial in the long run.
Overall, we are optimistic about ACME’s growth prospects and believe that its valuation will improve over time.
Published on February 5, 2025.
