Green Stocks Jan 17: The Volatility Problem of Green Energy Stocks

Green Stocks Aug 26: TATA Power, JSW Energy Stocks Prices Up

On the last day of the week, it was yet another day when green energy stocks struggled to retain gains made. But it’s time to talk about a bigger issue with these stocks. Too much volatility. It is almost as if some of these stocks deal only in circuit breakers when it comes to price movements. That can’t be good in the long term for anyone.

Besides indicating excessive speculation, it is also an issue for management to understand. Be it transparency in sharing information, educating investors on margins or even the difference between winning an order and actually delivering, firms it seems, have a long way to go. Consider how SWREL, after rising 10% yesterday, was down 10% today. What happened overnight to the business? Nothing, we would argue.

Or look at how Waaree RTL has moved this week, down 20% on Monday, up 20% on Tuesday and post results, a steep fall yet again. These are almost schizophrenic price movements, that deserve a deeper look to put a pause on the extreme volatility. It’s the same story across most stocks, with prices rising 5-10% on each order win. The idea of valuing a firm having a certain capacity to manufacture, execute (EPC) or develop (developer) renewable projects is really not so complicated as to make it the casino it seems to be right now.

Firms are trapped between the desire to retain the rich valuations the market has accorded them, and protecting the same by any means possible including announcing orders multiple times if needed. Like announcing a win during a tender, then the letter of award for the same project, then the start of construction perhaps, and definitely the commissioning. That’s perhaps three to four times that the same project is used to impress investors. Investors need to be smarter than that.

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