Green Stocks Feb 19- Profit Booking, Capex Plans Reduce Investor Appetite

While stocks fell across the board today, the green pack felt the pain as well, with most stocks correcting. While some market watchers are attributing this to profit booking, we believe it is also linked to worries about medium-term profitability and margins. Managements have become more circumspect about guidance numbers in many cases, with most either sticking to or avoiding revenue guidance for now.

Industry leader Waaree Energies, which has shed over 5% this week, seems to be fighting a perception that high capex plans will lead to a dilution of profits, as debt servicing costs could also rise. Other firms also face the same prospects as sitting back is no longer an option for most, thanks to the fast evolution of technologies, customer segments, and policies in the sector.

We have written earlier about the unreported risk to wind energy from solar plus BESS, but even solar could see industry consolidation with the top 20% manufacturers being weeded out from weaker players who might struggle to raise financing for technology upgrades and expansion.  This is because, correct or not, the perception is gaining ground among bankers that an overcapacity risk is real.

Medium-term triggers include Reliance making announcements of large project capacity addition plans, finally on solar, BESS projects commissioning, and a clearer timeline on forward progress on green hydrogen, which remains under a haze of conflicting cost claims and counterclaims. Any firm failing to deliver in Q4 numbers could be in for some serious questioning, too, post-March. 

With the CleanMax IPO upon us, investors will also start to discern more carefully between firms, something that has encouraged us to create a special product to track Green energy firms. Keep watching this space for the announcement soon!

List of Green Stocks