The shares of this small cap company majorly engaged in developing, building, operating, and maintaining utility-scale renewable energy projects, were in focus after the company’s premium valuation came into notice.
With the market capitalization of Rs. 14,709 Crores, the shares of Juniper Green Energy Ltd were trading at around Rs. 258 per share which is 8.5 percent discount from its 52 week high of Rs. 282 per share and is trading at a P/E of 558 whereas industry P/E stands at 22.1
Q1 FY27 Financials:
Year on Year analysis: Revenue from operations has increased from Rs. 161 Crores to Rs. 291 Crores, up 80 percent. Operating profit has increased from Rs. 138 Crores to Rs. 261 Crores, up 89 percent and net profit has increased from Rs. 22 Crores to Rs. 33 Crores, up 50 percent.
Quarter on Quarter analysis: Revenue from operations has increased from Rs. 213 Crores to Rs. 291 Crores, up 36 percent. Operating profit has increased from Rs. 183 Crores to Rs. 261 Crores, up 42 percent and net profit has increased from Rs. 22 Crores to Rs. 33 Crores, up 50 percent.
Current Valuation Needs Future Earnings
Considering the fact that it is trading at a P/E ratio of 558x, it is challenging to justify Juniper Green Energy’s valuation based on the current earnings. What matters most is whether there will be significant earnings growth to justify the high P/E ratio in a short while. The investment rationale behind Juniper Green Energy lies in the fact that the management expects earnings growth because of rapid expansion of the operating portfolio.
Capacity Expansion Is the Main Earnings Trigger
Management continues to be confident in its execution strategy, with an aim for about 2 GW of commissioning during FY27, taking capacity to about 4 GW. In FY28, management sees commissioned capacity at 6 GW mark. Along with the expansion, management sees a run-rate EBITDA of ₹2,700 crore for FY27 and ₹4,500 crore in FY28.
The anticipated growth in profitability is definitely the most convincing factor behind the valuation. However, it should be noted that these are the run-rates, and hence valuation is subject to execution and commissioning success and not profitability yet.
FDRE and BESS Strengthen the Business Proposition
Juniper seems to be becoming more concerned about dispatchable renewable energy. According to the management, 84% of Juniper’s portfolio consists of FDRE and wind-solar projects and amounts to 11.2 GW of renewable energy capacity, as well as around 9 GWh of battery storage systems.
Juniper seems to believe that such an approach can help the firm take advantage of the growing need for dependable renewable energy sources. Lowering costs of batteries are also affecting the economics of projects. According to the management, at present prices of batteries, solar-plus-BESS can provide equal returns, as well as being easier to implement.
Contracted Portfolio Provides Visibility
The growth of the company is backed up by a significant contracted backlog. Over 6.2 GW of capacity is already installed or signed under PPA, and 98% of the contracted capacity is backed by an A-rated or better credit-quality counterparty.
This offers visibility on cash flows to come and cuts down reliance on merchant power pricing for the main portfolio. However, the company still strategically relies on merchant BESS where there is a need to connect to the grid or transition to PPAs.
Balance Sheet Supports the Expansion
However, Juniper is now better positioned financially after its ₹1,800 crore primary IPO offering. The management anticipates that the company will experience an increase in net worth from approximately ₹3,463 crore before the IPO to approximately ₹5,200 crore. In addition, it has refinanced more than ₹1,700 crore worth of three projects at less than 8%, while the cost of debt for the operating portfolio averages at about 8.5%. The healthy balance sheet is expected to help finance the expansion that is capital intensive, but still reliant on execution.
Can 558x P/E Be Justified?
In all likelihood, 558x P/E cannot be substantiated by current earnings. This must be justified on the basis of the expected change in scale and profitability. The extensive pipeline of projects, FDRE-dominated portfolio, growth in BESS, and EBITDA targets of the management make up the basis of this reasoning.