Should you invest in this monopoly stock? | India's only solar glass maker | Fundamental analysis

Today, if leaders, industrialists and corporations around the world are arguing about anything, it is energy. The world is facing many problems that are closely related to each other, such as crude oil prices, inflation, rising interest rates, recession, climate change, energy crisis, etc. So today we are seeing a global transition away from non-renewable energy sources. such as oil and coal, to renewable sources such as wind and

solar

. But if we have such a simple solution before us, why have we not been able to switch to these energy sources until now? Well, someone has rightly said that something simple doesn't have to be easy.

Today, not

only

in our country but throughout the world, dependence on non-renewable energy sources has increased considerably, and that is why it is time to take global problems seriously. But with every problem comes an opportunity, and in the race to become the world's next superpower, India wouldn't want to miss a new opportunity, right? So let's talk today about one of those renewable energy players who enjoy a

monopoly

in their business. Renewable sector? Monopoly? How is it possible? It can happen, and that's what makes

this

new Monopolish series from Groww so special. Here, each week, we bring you an in-depth

analysis

of several of these

monopoly

stock

s.

If you haven't seen our previous Monopolish video, be sure to check it out too. In that, we are talking about a company that is a dominant player in the steam turbine space in India. Well, back to today's video, first, let's look at the renewable energy space. According to Visual Capitalist's infographic, there are mainly five types of renewable energy sources in the world: wind,

solar

, hydroelectric, biomass and geothermal. Even as of now, if you look at it, generating power per megawatt-hour from wind and solar costs between $36 and $38. That is, if we have to abandon current oil and coal, then we have solar and wind energy as the most economical option.

India's current installed capacity: Solar power is around 48 GW, wind power is around 40 GW and small and large hydropower together has an installed capacity of more than 50 GW. Well, both wind and solar energy have their own advantages and disadvantages. But in the case of wind energy, it will

only

be possible to install a wind park where you can get wind in the right capacity. This is not the case in the case of solar energy. Actually, you can't install windmills anywhere, you need a dedicated space for it. Because, for now, wind energy can only be available as large-scale grid connectivity.

While solar energy is not only available in the form of large-scale grid connectivity, it is also available in the form of a distributor by installing it in a common person's house. Therefore, there is more flexibility in the case of solar energy than in the case of wind energy. Due to these few advantages,

invest

ors and world leaders have for some time now shown a lot of interest in renewable energy, especially solar energy. In 2015, our Prime Minister Shri Narendra Modi and former French President Francois Hollande created the ISA, i.e. the International Solar Alliance, which all countries have joined today.

The solar energy sector not only promises a healthier, cleaner and greener environment, but also offers immense growth opportunities for companies operating in

this

sector. The energy crisis is spreading throughout the world, including Europe. And on the other hand, powerful oil cartels like OPEC+ inflate energy and crude oil prices every day due to their dominance of supply. Energy security is becoming a major concern for all countries. Without power, everything else would stop. All health, manufacturing, research and safety-related work carried out in the country will be carried out. But can the problem of leading energy security be solved with solar energy?

It is definitely possible. As we mentioned before, solar energy can work in a decentralized generation model in addition to being a cheaper and cleaner option. Even if a thermal power plant is shut down due to a lapse of time, its entire generating capacity is lost, while the power generated from the sun can be generated in every house in every corner of the country. Our country's vision is to achieve net zero emissions by 2070. And to do this we need to increase our renewable energy capacity to 500 GW by 2030 and meet 50% of our energy needs through renewable energy. And here solar energy is going to play an important role.

Now imagine how big the solar energy market is! And such a large market, with the support of the government, offers a great opportunity for the

invest

or and for the actors associated with this sector! And today our company has established its dominance in an important segment of the high-growth solar energy ecosystem. We are talking about Borosil Renewables. You may have heard or read about this company in the news and newspapers. Let's understand what the company does after all. And by date and in that part of the solar energy value chain the company has built up its monopoly.

Solar cells are the most important part of solar energy generation. What is the function of solar cells? easy! When the sun's rays fall on the surface of the solar cell, it works to convert those sun rays into electrical energy. So, does Borosil Renewables make solar cells? No. No. If you look closer at the inside of a solar cell, you will see

glass

, made by Borosil Renewables. Confused? Anyone can make

glass

, right? In fact, this is no ordinary glass. The raw materials necessary to manufacture this glass are very difficult to obtain and their cost is also very high.

Now, using this raw material, the company manufactures glass with the maximum precision necessary to have a solar transmittance of around 92%. Borosil Renewables guarantees more than 94% transmission. The company's customers now use these solar crystals, which they typically purchase in fractional sizes. And the company has to deliver it to its customers by cutting glass, which is a high-precision task. After this cutting, the company performs some additional processes on the glass such as edge finishing and coatings that increase the efficiency of the glass, etc. And finally, it tempers. Glass tempering is mainly done to improve the strength of the glass.

Tempering glass must also be done very carefully, as even a small piece can warp the entire glass. And finally, after this process, this glass is sent to solar cell manufacturers, who do further processing and connection and manufacture solar cells. Now you yourself must have understood how important solar glass is for a part of a solar panel. Therefore, it is not easy for anyone to enter this space due to the high precision, experience and manufacturing cost of solar glass. Therefore, Borosil Renewables is India's first and only solar glass manufacturing company. You heard right, The Only Company! The current capacity of the company is 450 TPD, i.e. tons per day.

But Borosil Renewables is focused on expansion as they are already operating at full capacity, and capacity expansion is critical for further growth. It recently announced the acquisition of Interfoat Group, Europe's largest solar glass manufacturer, to help expand its operational capacity and global presence. As per the company's plan, it will increase its own capacity almost 5 times from the current 450 TPD to 2400 TPD by calendar year 2025. This will give the company the benefit of economies of scale, which in turn will help them. reduce costs and improve margins. Talking about the company's revenue mix, around 26% of the company's revenue comes from exports.

Although the company enjoys a near monopoly in the domestic market, on a global scale China dominates almost the entire market. But the company also tries to compete in the global market with its efficient management and cost reduction techniques. Let us now see what is happening in this industry globally, which is why Borosil Renewables enjoys a high barrier to entry. I have already told you that precision and high cost are involved in the manufacture of solar glasses. But when there is so much demand for solar energy in the market now, which is going to increase in the future, why is no other big player entering this market?

This is due to fierce competition and low pricing power. However, global players such as Saint-Gobain, Şişecam Group and Guardian Glass have also been present for many years. In fact, Borosil Renewables already started its operations around 2010 from Bharuch, Gujarat. But when the country China, known as the factory of the world, unleashed its dragon on this industry, then you can understand the effect it must have had. The prices of solar modules and everything related to them suddenly fell in the international market. In fact, in countries that previously led this market, such as Australia, Japan and the EU, solar plants began to close due to Chinese players.

It is not that today there is no manufacturing in the country, but the situation is such that today China is taking a dominant lead on a global scale! And because of this, China also enjoys pricing power in this industry. So if someone wants to enter this industry, they have to compete with Chinese manufacturers and sell their products at low cost from the initial stage! For this reason, there is also concern about the profitability and margin of the industry. However, the Government of India has also taken several initiatives over the years to establish a level playing field.

Like the PM-KUSUM program and the CPSU program, in which only solar cells and panels made in India will be used. In these schemes, manufacturers of solar modules and related equipment definitely had a chance, but solar glass was not included in this list. This means that even today a manufacturer can import solar glass from abroad to make this panel. Yes, for some time now the company had the opportunity to impose anti-dumping duties on the Chinese government. But the government is not going to go any further. This means that Borosil Renewables, which until now was almost a lone player in the domestic market, may now have to compete with global players, especially the Chinese.

Despite this, Borosil Renewables is doing business in India today at the same rate at which imported products are available, reducing its rising manufacturing cost. Let's talk about the company's finances. Considering the company's recent quarterly results, Borosil Renewables has seen a significant drop in its margin. The company's EBITDA margin was 30.2% in the previous quarter, which has decreased to 26.1% in this quarter. According to management, this drop in margin is mainly due to the fact that the selling price of solar glasses has decreased in international markets, mainly due to Chinese players. Apart from this, the government also suspended the anti-dumping duty.

If we look at the share price of the company, in the last 4 years, that is, since its listing in May 2018, the company's shares have so far increased by approximately 156%. However, the company's

stock

has remained stable over the past year and is still at the level of November 2021. One reason could be that the company's sales have remained stable in recent quarters. This will likely improve once the company's new manufacturing plants come online, as the company is already working at full operational capacity. But will Borosil Renewables be able to maintain its near monopoly in its domestic market? We will have to monitor this very closely in the coming quarters.

This concludes today's video. If you like our

analysis

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