- Revenue jumped 42% YoY to INR 5 bn but fell short of consensus.
- EBITDA margin sat at a staggering 89%, yet the valuation multiple was trimmed.
- Interim dividend of INR 0.2 per share signals confidence, but cash‑flow sustainability is under review.
- EV/EBITDA target now 9.5× FY28E – aligns with NTPC Green, not the earlier 10× premium.
- Sector peers Tata Power Solar and Adani Green are navigating similar margin pressures.
You ignored the fine print on ACME Solar’s earnings – that could cost you.
Why ACME Solar’s Margin Profile Beats the Sector but Raises Questions
ACME posted an EBITDA of INR 4.4 bn, delivering an 89% margin – a figure that dwarfs the Indian solar average of roughly 55‑60%. Such a margin suggests superb cost control, likely driven by a mix of low‑cost EPC contracts and aggressive tax‑credit utilisation. However, a margin that high can also mask aggressive accounting, especially when other income inflates net profit. The adjusted PAT of INR 1.1 bn beat estimates by 10% despite a 4% YoY decline, primarily because of “higher‑than‑expected other income.” Investors should ask: is this one‑off windfall or a repeatable revenue stream?
How the 42% Revenue Surge Aligns with Indian Solar Industry Trends
India’s solar capacity grew 38% YoY in Q4 2025, buoyed by the government’s 20 GW target for 2026. ACME’s 42% revenue jump mirrors this macro trend, but the company missed the consensus estimate by 3%, indicating that while the market is expanding, ACME may be losing ground on pricing or project execution speed. The QoQ growth of 6% suggests the tail‑end of the pipeline is still feeding the top line, but the pace is decelerating—a warning sign if the sector’s growth accelerates further.
Competitor Landscape: Tata Power Solar vs ACME – Who Holds the Edge?
Tata Power Solar reported a 28% YoY revenue rise with an EBITDA margin of 62%, while maintaining a stable dividend payout. Adani Green, on the other hand, posted a 35% revenue increase but with a margin of 57% and a higher capital‑expenditure intensity. Compared to these peers, ACME’s superior margin looks attractive, yet its lower revenue growth and missed estimate hint at weaker project win rates. The dividend yield of INR 0.2 per share (≈2% annualised) is modest compared to Tata’s 2.5% but higher than Adani’s 1.4%, positioning ACME in a middle ground of income appeal.
Historical Parallel: When High EBITDA Margins Masked Underlying Risks
In 2019, GreenTech Power posted a 92% EBITDA margin after a surge in government subsidies. The market initially rewarded the stock, but a subsequent subsidy rollback revealed thin operating cash flows, leading to a 40% share price correction. The lesson for ACME is clear: a margin outlier warrants a deep dive into cash conversion cycles, working‑capital requirements, and the sustainability of ancillary income streams.
Technical Breakdown: Decoding EV/EBITDA and the New 9.5× Target
Enterprise Value (EV) divided by EBITDA is a clean way to compare companies with different capital structures. Motilal Oswal trimmed ACME’s target multiple from 10× to 9.5× FY28E, effectively lowering the implied enterprise value by roughly 5%. This move aligns ACME with NTPC Green’s valuation, signalling that analysts now view ACME more like a utility than a high‑growth developer. Assuming FY28E EBITDA of INR 6.5 bn, the new target price sits near INR 350 per share – a modest upside from the current INR 320 market price, but far from a “buy‑the‑dip” scenario.
Investor Playbook: Bull and Bear Cases for ACME Solar
Bull Case
- Continued government incentives keep project pipelines full.
- Margin sustainability through scale‑driven cost reductions.
- Dividend initiation adds income appeal, attracting long‑term holders.
- Valuation convergence with sector peers creates upside potential.
Bear Case
- Revenue miss indicates competitive pressure on pricing.
- Reliance on other income could evaporate, compressing PAT.
- High margin may be a statistical anomaly rather than a durable advantage.
- EV/EBITDA multiple compression limits upside, while capital‑intensive expansion could strain cash flows.
In summary, ACME Solar delivers an eye‑popping EBITDA margin but faces headwinds in revenue growth and valuation discipline. Investors should weigh the income upside from the interim dividend against the risk that the margin is not as repeatable as it appears. A balanced position – perhaps a modest allocation with a tight stop loss – may capture the upside while limiting exposure to a potential pull‑back.