Let’s revive this thread. The solar energy sector has experienced quite a bit of turbulence in the United States, but now the situation has remained somewhat more stable. Hopefully, Trump won’t come up with new tricks for the sector, so that returns would be a bit more predictable. The gradual phasing out of IRA’s 45x credits, originally planned for the coming years, will now only begin in 2030, with tax incentives completely disappearing at the beginning of 2033.
I have invested in Nextracker, which manufactures frames for solar panels and provides software for them, allowing the panels to track sun rays for maximum energy production. Nextracker’s balance sheet is very strong, and it has made several business-supporting acquisitions with pure cash over the past few years. These acquisitions have created synergy by offering customers more comprehensive solar power plant solutions instead of just solar trackers, and have aimed to increase the domestic content of products, for example, to maximize 45x credits. Most recently, on October 15th, a multi-year agreement was announced with T1 Energy in the United States for the manufacturing of steel panel frames.
The company has exceeded analysts’ forecasts almost every time since its listing. The latest Q3 report, released on October 23rd, was also a positive surprise. Growth remains very strong; revenue grew by 42% from the comparison period to $905 million. Adjusted EBITDA margin is 24.7%, and net profit is $181 million. The company is debt-free, and at the end of Q3, it had a staggering $845 million in cash. The order book is a record $5 billion. The company has expanded to India, among other places, and now a record in orders has been achieved in Europe as well. For example, according to a press release in June, solar trackers are being delivered to Greece for one of the continent’s largest solar power plants. The company is conquering new market areas, as a joint venture for delivering solutions to the Middle East and North Africa was announced alongside the earnings release.
Nextracker previously announced it would host a Capital Markets Day on November 12th. It will be interesting to see what the company reveals about its future strategy at the event. The company’s cash reserves have grown very nicely, even though strategic acquisitions have been made with cash in between. Could profits be distributed from the cash, perhaps through share buybacks, or would the company find a way to invest the funds more profitably back into its own business? Given how strong that growth has been, can it continue at the same pace?
I joined the company’s journey in February 2024 at a price of €59.62. At that time, the P/E was around 10, even though the company was already very profitable then, e.g., ROE, if I recall correctly, was over 30%. From there, there was an immediate larger drop to around €40, at least because the company had not converted its announced order backlog into revenue quickly enough, in the market’s opinion. There is also a class action lawsuit ongoing, alleging that the company did not communicate this transparently. After this, it languished for a long time until, with Trump’s policies calming down, we have moved upwards as the market regained confidence.
The stock’s undervaluation, at least as measured by the P/E ratio, has nicely approached the market median. P/E (TTM) is now 24.4. My average share price is $48.59, and the return in euros has been a pleasant 89.18%, which I can be very satisfied with, especially if other investments haven’t gone perfectly. A positive problem has arisen, however, in that the company’s weight in my portfolio is approaching 30%, so I might trim some profits. I still believe that the company will continue its profitable growth, although some correction might occur along the way, as has often happened during my ownership.
What views do other forum members have on the solar energy sector? What stocks do you hold, and what are your thoughts on the future development direction of the industry?
.But, in summary, it’s going to be tough for the next couple of quarters, and perhaps by the end of next year, revenue growth will start to pick up again. That fifth-generation battery is quite a promising product, as is the 480V IQ9. In the big picture, it’s quite sluggish in the residential sector in the US, at least temporarily, now that the 25D support ceases; companies operating in solar farms are doing better.
