On Friday, Roth/MKM maintained a positive outlook on ReNew Power (NASDAQ:RNW), reiterating a Buy rating with an increased price target of $9, up from the previous $8.
The firm's endorsement follows ReNew Power's fourth fiscal quarter earnings beat and the company's release of encouraging financial guidance for fiscal year 2025. ReNew Power has also projected a steady growth in its operating capacity and adjusted EBITDA, anticipating an approximate 16-18% increase through fiscal year 2029.
The analyst from Roth/MKM highlighted the company's successful acquisition of 8.2 gigawatts of auction wins over the past year, attributing this achievement to the significant number of auctions in India and the decline in capital expenditure costs. These auction wins are expected to yield attractive returns for ReNew Power.
The firm's confidence in ReNew Power is further bolstered by the company's robust growth outlook and its potential to generate an appealing return on invested capital (ROIC). In light of these developments, Roth/MKM has adjusted its fiscal year 2025 estimates upwards, which contributed to the decision to raise the price target.
ReNew Power's strategic position in the renewable energy sector is seen as advantageous, especially considering the favorable market dynamics in India. The company's focus on expanding its operational capacity and enhancing its financial performance aligns with the positive guidance it has provided for the near future.
The raised price target reflects the firm's expectation that ReNew Power will continue to capitalize on its growth opportunities and maintain its trajectory of delivering value to its stakeholders. The reaffirmed Buy rating indicates the firm's belief in the company's potential to outperform in the market.
In other recent news, ReNew Energy has reported its first profitable fiscal year since its listing. The company's 4Q FY'24 Results and Long-Term Outlook earnings call highlighted significant growth, with the company securing 8 gigawatts of new capacity since April 2023 and signing Power Purchase Agreements (PPAs) for 2.2 gigawatts for FY'25.
ReNew Energy's long-term plan includes achieving a pipeline of over 21 gigawatts by 2029. The company has also reported an adjusted EBITDA of INR65.6 billion and INR13.7 billion in Cash Flow from Operations (CFO) for FY'24. The operational capacity of 19.4 gigawatts is expected to generate over 25% annual growth, contributing INR35 billion to INR42 billion in CFO.
The company plans to monetize around 2 gigawatts of assets by FY'29 and operationalize 1,900 to 2,400 megawatts of new projects in FY'25. ReNew Energy aims for 16% to 18% annual growth through the end of the decade, with plans to achieve an adjusted EBITDA of INR76 billion to INR82 billion in FY 2025. The company's recent developments also include securing access to over 10 gigawatts of connectivity for future projects.
InvestingPro Insights
Following Roth/MKM's optimistic stance on ReNew Power, a deeper dive into the financial health and market performance of the company offers additional insights. According to InvestingPro data, ReNew Power is currently trading at a P/E ratio of 42.62, which, while high, is adjusted to 40.41 when considering the last twelve months as of Q4 2024. This adjustment aligns with the company's expected earnings growth, as highlighted by a low PEG ratio of 0.3 during the same period, suggesting that the company may be undervalued based on its earnings growth projections.
The company's revenue growth also paints a positive picture with a substantial increase of 23.4% over the last twelve months as of Q4 2024. This growth is a testament to ReNew Power's expanding operations and market presence, particularly in the renewable energy sector in India. Additionally, an impressive gross profit margin of 96.02% indicates efficient management of the cost of goods sold and operational expenses.
InvestingPro Tips further reveal that ReNew Power is a prominent player in the Independent Power & Renewable Electricity Producers industry, with management actively engaging in share buybacks, reflecting confidence in the company's value. Moreover, analysts predict profitability for the company this year, which is consistent with the positive outlook provided by ReNew Power for fiscal year 2025 and beyond.
For those considering a deeper analysis, there are additional InvestingPro Tips available that discuss the company's financial nuances, such as its significant debt burden and cash burn rate. Interested readers can access these valuable insights with a subscription to InvestingPro, and by using the promo code PRONEWS24, they can enjoy an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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