Green Stocks Jan 7: Solar Manufacturers Attempt Comeback

Solar manufacturing stocks,  beaten down so much until now, made an attempt to make a comeback today, as most stocks rose. The movement seems to be more a case of adjusting for  underlying value than any turnaround yet, with operators probably counting on a smart set of Q3 numbers. Considering that most of the dire prognosis for overcapacity and other pressures are expected to kick in by Q2 of FY 27,something that we believe remains to be seen considering the limited understanding of how the sector actually works. 

The obsession with nameplate capacity versus actual demand for instance is overblown, when you consider that even in China, actual capacity utilisation is running at around 60% in the sector. Add to that the many walls of protection that the players in India have, and one believes that the larger players still have a long enough runway to deliver returns.   

With the week yet to play out, expect more such gyrations before we see some sort of a consensus on appropriate valuations for these stocks that were flying high just a year back. 

For investors, there is as always at least a lesson from the movements, if not money. And that is about taking a long term view of not just the narrative, but also paper supply in a stock segment. The solar category has seen a strong supply of new firms hitting the market, which has also served to remove an FOMO among investors of riding the growth wave in the sector. With India looking set to establish a base where high growth rates going ahead will be tough, the big trigger will be a trade deal with the US at least, followed by new demand triggers like say the first of the planned green hydrogen projects that were expected to start hitting the ground by 2028. 

What may actually happen is some significant capacity retirements, as many players take the call to invest further into technology upgrades versus closing, easing the oversupply risks for the survivors.

List of Green Stocks