Sterling and Wilson Solar extends fall amid margin concerns; stock dips 11%

The management believes that recent one-off events would materially impact the costs of the affected projects under execution, impacting margins for the year end March 31, 2021

Shares of Sterling and Wilson Solar continued to be under pressure in Monday's session, down 11 per cent at Rs 239.10 on the BSE, in an otherwise strong market, amid concerns that the recent one-off events have resulted in an unanticipated impact on the company’s operations and its margins.

The stock was quoting lower for the fifth straight trading day, having lost 22 per cent in the past one week. With last week’s decline, the stock has now corrected 30 per cent from its 52-week high level of Rs 343.50 touched on April 9, 2021.

At 02:45 pm, Sterling and Wilson Solar was trading 10 per cent lower at Rs 242, as compared to a 1.6 per cent rise in the S&P BSE Sensex. The daily volumes on the counter more than doubled, with a combined 4.1 million equity shares having changed hands on the NSE and BSE.

Following the insolvency of one of the company’s prime sub-contractor in a particular geography, the company has had to appoint alternate sub-contractor(s) at a higher price due to border restrictions and other impacts arising from the ongoing Covid-19 pandemic. This has also led to an increase in project timelines and consequential overheads which are material in this particular geography, Sterling and Wilson Solar said in a business update.

The global Solar EPC industry has been impacted off late, with several module manufacturers refusing to honour past price contracts given the sharp increase in the cost of modules. "Some of the company’s module manufactures have also reneged on honouring their contractual commitments and have sought to substantially increase their module prices in two projects. The continued increase in commodity prices and freight costs remain at their all-time high," it said.

The management believes that these recent one-off events would materially impact the costs of the affected projects under execution, impacting margins for the year-end March 31, 2021. The management is taking all steps to minimise the impact of the aforementioned events, the company said.