Wednesday, 16 July 2025

Sterling and Wilson Renewable Energy Ltd (SW Solar Ltd): Brightening the Future with Solar – A Deep-Dive Investment View...

~Sumon Mukhopadhyay.

Company Overview:

Sterling and Wilson Renewable Energy Ltd. (₹329), a leading global EPC (Engineering, Procurement, and Construction) solutions provider in the solar energy space. 

The company specializes in delivering utility-scale solar power projects and O&M (Operations & Maintenance) services across 28+ countries, including India, the Middle East, Africa, and Southeast Asia.

SW Solar Ltd benefits from a strategic promoter base, including:

  • Reliance New Energy Ltd (subsidiary of Reliance Industries) – 32.5% stake.
  • Shapoorji Pallonji and Company Pvt Ltd – 6.9% stake.

This backing ensures access to strong financial, operational, and technical support.

(Screener.in, 2025; Business Today, 2025)

Q4 FY25 Financial Highlights:

Sterling and Wilson posted a remarkable improvement in both topline and bottom-line metrics:

  • Revenue: ₹2,506.45 crore — up 36.02% QoQ and 106.91% YoY (Q4 FY24: ₹1,211.40 crore).
  • Net Profit: ₹55.38 crore — a multi-fold increase over ₹1.45 crore in Q4 FY24.
  • FY25 Annual Revenue: ₹6,341.46 crore — up 103.2% YoY.
  • FY25 Net Profit: ₹81.45 crore — marked turnaround from previous low earnings.
  • Working Capital Cycle: Reduced to 47.2 days from 145 days.
  • Debtor Days: Down to 72.6 days from 105 days.
  • Order Book: Historic high of ₹10,500 crore.
  • Debt Rating: ‘BBB+’ reaffirmed by Infomerics Ratings, with improving coverage metrics.

(Business Standard, 2025; Screener.in, 2025; Infomerics, 2025)

Investment Rationale:

🧨Strong Demand for Renewable Energy:

The global energy landscape is shifting dramatically, fueled by climate action goals, energy security concerns, and ESG mandates. With India targeting 500 GW of non-fossil fuel capacity by 2030, solar is at the forefront of this transformation.

It’s specialization in utility-scale projects aligns well with this demand. Supportive policy initiatives (e.g., ALMM waiver extension, green energy corridor investments, PLI schemes) further strengthen its long-term prospects.

(IEA, 2024; MNRE, 2025)

🧨Robust Project Pipeline & Execution Track Record:

  • ₹10,500 crore unexecuted order book ensures strong revenue visibility for FY26 and FY27.
  • Active bid pipeline of 23 GW in India
  • Secured 11 out of 12 private-sector IPP projects in H1 FY25.
  • Emerged as L1 bidder for 225 MW solar PV project in Gujarat.
  • Consistently executing international projects in Saudi Arabia, Oman, and Australia.

This reflects SW Solar’s execution capability, pricing competitiveness, and strong pre-qualification credentials.

(Saur Energy, 2025; IndMoney, 2025)

🧨Strategic Promoter Backing:

Reliance’s 32.5% stake gives SW Solar Ltd:

  • Access to financial muscle and potential integration into a larger green energy ecosystem.
  • Entry into next-gen solar storage, hydrogen, and grid infra segments via synergy.
  • Global expansion support through Reliance’s diversified global presence.

The Shapoorji Pallonji legacy also offers engineering depth and industry networks.

(ET EnergyWorld, 2025)

🧨Commitment to ESG & Institutional Credibility:

  • Strong ESG alignment makes SWSOLAR attractive for green fund flows and FIIs.
  • Focus on delivering clean, affordable, and scalable energy solutions.
  • Zero-carbon project focus aligns with United Nations SDG goals.
  • Increasing presence in ESG-focused ETFs and climate funds.

(Morningstar, 2025; UN Sustainable Goals Report, 2024)

🧨Operational & Financial Improvements:

SW Solar has shown marked improvements in efficiency and discipline:

  • Reduced debtor days and working capital requirements.
  • Efficient project turnaround cycle.
  • Improving cash flow from operations.
  • Reaffirmed BBB+ credit rating, stable outlook.
  • EPS doubled in Q3 FY25, and Q1 FY25 achieved 78% of Q4 FY24’s revenue — pointing to sustained growth momentum.

(Screener.in, 2025; Infomerics, 2025)

Valuation & Upside Potential:

  • Current Market Cap: ₹7,282.69 crore (as of July 3, 2025).
  • P/E Ratio: ~89.41 (trailing; due to base-effect from prior year losses).
  • P/B Ratio: ~7.63.
  • 52-week Range: ₹218.45 – ₹828.00.
  • Intrinsic Value Estimate: ₹399.44.
  • Upside Potential: ~21% from current price of ₹329.

Some platforms suggest the stock is undervalued by ~33% based on future cash flow models. While the high P/E appears stretched, it reflects earnings normalization from a low base.

(Alphaspread, 2025; TradingView, 2025)

Market Sentiment & Analyst Outlook:

  • Analysts remain cautiously optimistic, with price targets ranging between ₹400–₹440.
  • Positive commentary from market participants on X (formerly Twitter) points to turnaround conviction.
  • Investors recognize the sharp rebound in financials and improved governance under Reliance's stewardship.

(TradingView, 2025; YouthCouncilofIndia.org, 2025)

Risks to Consider:

Despite the promising outlook, investors must factor in:

  • Execution Risk: Delays or cost overruns can impair profitability
  • Technology Risk: Falling behind in solar + storage tech could impact relevance
  • Policy Risk: Sudden regulatory shifts or trade barriers (e.g., import duties on solar modules)
  • Competition: Pressure from domestic and Chinese EPC players
  • Valuation Risk: High near-term valuation due to low base recovery

(IEA, 2024; Tickertape, 2025)

Conclusion:

Sterling and Wilson Renewable Energy Ltd stands at a critical inflection point. The company has successfully transitioned from a debt-laden past into a financially stable, growth-oriented solar EPC leader. Backed by Reliance, supported by strong execution metrics, and propelled by tailwinds in global clean energy, SWSOLAR offers a compelling case for long-term investors.

Recommendation: BUY
Investment Horizon: Long-term (2–3 years)
Risk Profile: Moderate-to-High (project-based cyclicality)
Target Range: ₹400–₹440

References:

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