Motilal Oswal has initiated a buy outlook on Fujiyama Power Systems, setting a target price of ₹470. The brokerage points to the company's 1GW captive solar cell facility as a key factor for future profit growth. Investors should monitor how the company balances its expansion with rising demand for domestic solar components.
Detailed Coverage
Motilal Oswal has released a report initiating coverage on Fujiyama Power Systems with a buy outlook and a target price of ₹470. The brokerage’s position is largely based on the company’s integration of solar cell manufacturing, which is expected to address the current supply gap in the Indian market. The Indian government's Approved List of Models and Manufacturers, commonly known as ALMM, has created a push for domestically produced solar components, and the firm believes Fujiyama is well-positioned to benefit from this policy shift.
Impact of Captive 1GW Cell Capacity
The core of the brokerage's outlook is the 1GW Mono PERC cell facility operated by the company's subsidiary, UTLSOLAR. In the solar industry, the ability to control the manufacturing of cells—which are essential parts of a solar module—can help a company manage its costs better than those that rely entirely on imports. By having this captive capacity, Fujiyama aims to secure its supply chain, which could help protect profit margins from the price fluctuations often seen in global solar markets. Furthermore, this capacity allows the company to move into more advanced products, such as the 600W Mono PERC bifacial modules, which are increasingly favored for large-scale solar projects.
Financial Projections and Market Context
Motilal Oswal has projected significant financial growth for the subsidiary, UTLSOLAR, forecasting a compound annual growth rate of 49% for revenue and 53% for both EBITDA and adjusted profit between FY26 and FY28. These projections assume the company can successfully ramp up its production and maintain healthy demand for its locally made components. The brokerage applied a 20x earnings multiple to its FY28 estimates to arrive at the target price.
While the outlook is positive, investors should be aware of the inherent risks in the solar manufacturing sector. The sector is capital-intensive, and any delays in setting up or running new facilities at full capacity can increase debt pressure and limit cash flow. Additionally, the solar market is highly sensitive to changes in government policy, raw material costs, and competition from imported components if trade restrictions are eased. The company’s ability to execute its expansion plans and manage the technological shift toward newer cell chemistries, such as TOPCon, will be important for maintaining its market position. Investors may track future quarterly results to see if the company’s profit margins align with these growth projections.