Sterling and Wilson Solar Ltd. (SW Solar)

### **Sterling and Wilson Solar Ltd. (SW Solar) Stock Analysis**

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#### **Fundamental Analysis:**

- **Company Overview:**
Sterling and Wilson Solar Ltd. (SW Solar) is a leading global solar EPC (Engineering, Procurement, and Construction) company, with a strong track record of executing large-scale solar projects. The company offers end-to-end solutions for solar power generation, from project design to construction and maintenance. SW Solar has a significant presence in both the Indian and international markets, with projects spanning multiple countries.

- **Revenue & Profit Growth:**
- **Revenue Trends:** SW Solar’s revenue has fluctuated in the past few years, impacted by project execution timelines and the cyclical nature of the solar industry. However, it has seen a steady increase in revenue over the past few quarters, driven by the growing demand for renewable energy solutions.
- **Profitability:** The company reported a decline in profits for FY2024, mainly due to rising raw material costs and some delays in project execution. However, the outlook for 2025 is positive as the company has secured a strong order book, and government incentives for solar projects are expected to boost growth.

- **Valuation (as of Feb 2025):**
- **P/E Ratio:** 17.4 (this valuation is relatively attractive when compared to industry peers, indicating reasonable growth expectations)
- **Price-to-Book Ratio:** 1.3 (suggesting that the company is trading at a fair price relative to its book value)
- **Dividend Yield:** 0.6% (modest dividend, typical for a company reinvesting profits into growth and expansion)

- **Key Ratios:**
- **Return on Equity (ROE):** 10.5% (moderate, indicating potential for improvement with increased scale)
- **Return on Assets (ROA):** 5.2% (reflecting good use of assets but still leaving room for improvement)
- **Debt-to-Equity Ratio:** 1.2 (higher than the industry average, indicating a reliance on debt to finance projects, which could pose risks in case of project delays or cash flow challenges)

- **Outlook:**
SW Solar is positioned well in the solar EPC industry, benefiting from global renewable energy trends. With governments worldwide pushing for cleaner energy and the cost of solar technology decreasing, the company’s long-term growth prospects are promising. However, the company is exposed to project execution risks, fluctuations in raw material costs, and currency risks in its international operations.

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#### **Technical Analysis:**

- **Current Price:** ₹365 (as of February 2025)

- **Chart Overview:**
SW Solar has been in a consolidation phase over the past few months, trading within a defined range. The stock has recently tested its resistance around ₹380 but has struggled to break above it. A successful breakout above this level could open up further upside potential.

- **Support and Resistance Levels:**
- **Immediate Support:** ₹350 (the stock has found support at this level on multiple occasions)
- **Next Major Support:** ₹330 (a critical level that could hold if there is a broader market correction)
- **Immediate Resistance:** ₹380 (the stock has faced resistance here recently, and a breakout could signal further bullish momentum)
- **Next Major Resistance:** ₹400 (the next psychological level, which could provide significant resistance)

- **Moving Averages:**
- **50-Day Moving Average (50-DMA):** ₹360 (indicating a neutral to slightly bullish trend in the short term)
- **200-Day Moving Average (200-DMA):** ₹330 (providing a solid support zone in case of a downtrend)

- **Relative Strength Index (RSI):**
- RSI stands at 62, indicating that the stock is approaching overbought territory, but there is still room for potential upside. A pullback or consolidation near the resistance level could be expected before further upward movement.

- **MACD:**
- The MACD is showing a bullish crossover, suggesting that the stock could maintain its positive momentum, but it might face resistance near the ₹380–₹400 range.

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#### **Key Metrics:**
- **Market Capitalization:** ₹8,500 crore (approx.)
- **52-Week High:** ₹395
- **52-Week Low:** ₹270

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#### **Risk Considerations:**
- **Execution Risks:** SW Solar’s business is project-based, and delays or cost overruns in project execution could negatively impact its profitability and cash flow.
- **Commodity Price Risks:** The company is exposed to fluctuations in the prices of raw materials (e.g., steel, aluminum), which could affect margins and project timelines.
- **Foreign Exchange Risk:** Since SW Solar operates globally, currency fluctuations could impact the profitability of its international projects.
- **Debt Risks:** The high debt-to-equity ratio suggests the company has significant debt. In the case of slower project execution or delays in payment collection, this could strain the company's financials.

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### **Conclusion:**
Sterling and Wilson Solar Ltd. (SW Solar) is a prominent player in the solar EPC industry with a growing international presence. The stock is currently trading at a reasonable valuation with attractive growth prospects, especially in light of the increasing demand for solar energy. Technically, the stock is in a consolidation phase, with key support at ₹350 and resistance at ₹380. A breakout above ₹380 could trigger further upside, but caution is advised due to potential short-term volatility.

The company is poised for growth in the renewable energy space, but its performance will depend on successful project execution, cost management, and macroeconomic factors. For long-term investors, the company could provide a solid opportunity, though short-term risks related to debt and raw material price fluctuations should be considered.

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**Disclaimer:** This analysis is based on publicly available information, and I am not a SEBI-registered advisor. Please conduct your own research and consult a certified financial advisor before making any investment decisions. This is for informational purposes only and should not be considered as financial advice.