Solar companies making big profits now, but earnings may slow in next 3 years: DAM Capital

Mumbai (Maharashtra) [India]December 15 (ANI): Indian solar companies are currently making very high profits, but these profits are expected to slow down in the coming years as more factories are opened and competition increases, according to a report by DAM Capital.

The report explained that domestic solar module and cell manufacturers are currently enjoying super normal margins. The main reason for this is that imports are limited and India does not yet have sufficient domestic production capacity. Due to limited supply and strong demand, companies are currently able to generate higher returns.

“Domestic manufacturers are currently earning extraordinarily high returns due to import restrictions and limited domestic capacity. However, increased competition and rapid expansion in module and cell capacities will normalize profitability over the next three years,” the statement said.

The report also stated that many companies are rapidly expanding their module and cell production capacities. Competition will increase as more players enter the market and supply increases. Therefore, profit margins are expected to decrease gradually over the next three years.

The report expects module margins to fall sharply by FY27E. At the same time, returns from cell production are likely to moderate as large-scale capacities become operational. This means that companies may not be able to make the same level of profit as they do today.

Still, profits from the solar industry will not disappear completely, the report added. Instead, the snow pool is expected to shift towards the upper crops. As government policies change and supply chains strengthen, companies that move products up the value chain are likely to benefit more.

The report stated that companies that can quickly switch to backward integration will be in a stronger position. By creating more parts of the solar value chain themselves, these companies can capture a larger share of profits before competition becomes even more intense.

The report also expects the focus on local manufacturing to expand into areas such as Battery Energy Storage Systems (BESS), inverters and other related products. This is expected to create new opportunities for companies to grow, diversify and build stronger businesses.

Overall, the report said, even as current high profits decline, companies that expand wisely and move up the value chain will continue to benefit from India’s fast-growing solar sector. (MOMENT)