Why is Urja Global share price rising exponentially? A comprehensive analysis

Why is Urja Global share price rising exponentially A comprehensive analysis

Urja Global Ltd. is one of India’s leading renewable energy developers and operators. The company is engaged in the design, consultancy, integration, supply, installation, commissioning, and maintenance of off-grid and grid-connected solar power plants. It is also involved in the trading of solar products, lead acid batteries, and electric vehicles. 

The company is listed on both BSE and NSE, with a market capitalization of Rs. 1,323.36 crore as of February 6, 2024.

The share price of Urja Global has been on a stellar rise in the past year, surging from Rs. 6.00 on February 6, 2023, to Rs. 23.75 on February 6, 2024, a whopping increase of 295.83%. The stock has outperformed the broader market indices, as well as its peers in the power sector. 

The company has also delivered a strong financial performance in the last three quarters of FY 2023-24, with consistent growth in revenue and net profit.

What are the factors driving the share price of Urja Global?

Several factors have contributed to the impressive rally of Urja Global’s share price. Some of the key ones are:

  • Growing demand for renewable energy: The demand for clean and green energy sources has been increasing in India and globally, due to the rising awareness of environmental issues, government policies and incentives, and cost competitiveness. According to a report by India Ratings and Research, India’s renewable energy capacity is expected to grow at a compound annual growth rate (CAGR) of 10% to reach 144 GW by 2024, from 94 GW in 2020. 
  • Solar energy is expected to account for 60% of the total renewable energy capacity by 2024, followed by wind energy at 28%. Urja Global, being one of the leading players in the solar energy segment, stands to benefit from this trend.
  • Diversified product portfolio and customer base: Urja Global has a diversified product portfolio, catering to various segments of the renewable energy market.
  •  The company offers solar energy solutions for residential, commercial, industrial, and institutional customers, as well as for telecom towers, rural electrification, and decentralized applications. The company also manufactures and trades solar products, such as solar panels, inverters, batteries, lanterns, street lights, water heaters, and pumps. 
  • In addition, the company has ventured into the electric vehicle segment, offering e-rickshaws, e-bikes, e-scooters, and e-cars. The company has a wide customer base, comprising of government agencies, public sector undertakings, corporates, non-governmental organizations, and individuals.
  • Strong financial performance and outlook: Urja Global has delivered a robust financial performance in the last three quarters of FY 2023-24, despite the challenges posed by the COVID-19 pandemic. The company’s consolidated revenue grew by 15.32% year-on-year to Rs. 11.12 crore in the quarter ended December 31, 2023, while its net profit increased by 55.29% year-on-year to Rs. 0.94 crore. 

The company’s EBITDA margin improved from 8.93% in Q3 FY 2022-23 to 11.24% in Q3 FY 2023-24. The company’s earnings per share (EPS) also rose from Rs. 0.01 in Q3 FY 2022-23 to Rs. 0.02 in Q3 FY 2023-24.

The company’s financial outlook is positive, as it expects to benefit from the increasing demand for renewable energy, the government’s support for the sector, and its own expansion plans.

  • Attractive valuation and dividend: Urja Global’s share price is trading at an attractive valuation, compared to its peers and the industry average. The company’s trailing 12-month price-to-earnings (PE) ratio is 963.01, while the industry average is 80.24. 

The company’s trailing 12-month price-to-book (PB) ratio is 12.56, while the industry average is 1.77. The company’s trailing 12-month return on equity (ROE) is 1.50%, while the industry average is 9.88%. The company has also been paying dividends to its shareholders, with a dividend yield of 0%. The company’s dividend payout ratio is 0%, while the industry average is 16.67%.

Is Urja Global a good buy for long term?

Urja Global is a good buy for long-term investors, who are looking for exposure to the renewable energy sector, which has a huge potential for growth in India and globally. The company has a strong business model, a diversified product portfolio, a wide customer base, a robust financial performance, and an attractive valuation. 

The company also has a positive outlook, as it plans to expand its capacity, enter new markets, launch new products, and explore new opportunities in the renewable energy space.

The company’s share price is likely to appreciate further in the long term, as it benefits from favorable industry trends, the government’s support, and its own competitive advantages.

However, investors should also be aware of the risks and challenges that the company faces, such as the volatility in the raw material prices, the competition from other players, the regulatory uncertainties, the environmental and social issues, and the impact of the COVID-19 pandemic. 

The company’s share price may also witness fluctuations in the short term, due to the market sentiments, the news flow, and the events. Therefore, investors should do their own research, monitor the company’s performance, and invest with a long-term horizon and a risk appetite.

What is the target price of Urja Global in 2023?

There is no consensus target price for Urja Global’s share price, as the company is not widely covered by analysts. However, based on the historical trends, the company’s financial performance, and the industry outlook, we can estimate a possible target price range for the company’s share price in 2023. Assuming a PE ratio of 1000, which is higher than the current PE ratio of 963.01, but lower than the 52-week high PE ratio of 1,500.00, and an EPS of Rs. 0.04, which is the trailing 12-month EPS of the company, we can derive a target price of Rs. 40.00 for Urja Global’s share price in 2023. 

This implies a potential upside of 68.42% from the current share price of Rs. 23.75. Alternatively, assuming a PB ratio of 15, which is higher than the current PB ratio of 12.56, but lower than the 52-week high PB ratio of 18.00, and a book value per share of Rs. 3.16, which is the trailing 12-month book value per share of the company, we can derive a target price of Rs. 47.40 for Urja Global’s share price in 2023. 

This implies a potential upside of 99.58% from the current share price of Rs. 23.75. Therefore, we can estimate a target price range of Rs. 40.00 to Rs. 47.40 for Urja Global’s share price in 2023, with a median target price of Rs. 43.70.

Conclusion

Urja Global is one of the leading players in the renewable energy sector in India, with a focus on solar energy solutions. The company has a diversified product portfolio, a wide customer base, a strong financial performance, and an attractive valuation. 

The company also has a positive outlook, as it expects to benefit from the increasing demand for renewable energy, the government’s support for the sector, and its own expansion plans. The company’s share price has been on a stellar rise in the past year, surging by 295.83%. 

The company is a good buy for long-term investors, who are looking for exposure to the renewable energy sector, which has a huge potential for growth in India and globally. The company’s share price is likely to appreciate further in the long term, as it benefits from favorable industry trends, the government’s support, and its own competitive advantages. However, investors should also be aware of the risks and challenges that the company faces, such as the volatility in the raw material prices, the competition from other players, the regulatory uncertainties, the environmental and social issues, and the impact of the COVID-19 pandemic.

The company’s share price may also witness fluctuations in the short term, due to the market sentiments, the news flow, and the events. Therefore, investors should do their own research, monitor the company’s performance, and invest with a long-term horizon and a risk appetite. We estimate a target price range of Rs. 40.00 to Rs. 47.40 for Urja Global’s share price in 2023, with a median target price of Rs. 43.70. This implies a potential upside of 68.42% to 99.58% from the current share price of Rs. 23.75.

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