Phoenix Sees 72% Upside in Solara, Projects Over $1 Billion in Revenue by 2028

Phoenix Investments has reiterated its 'buy' recommendation for Solara, setting a target price of 163 shekels per share, which represents a potential 72% upside from its analysis base price of approximately 95 shekels. The firm anticipates that Solara's recent Polish acquisition, a potential Spanish deal, and ongoing project connections will significantly expand its operational scope. This analysis follows Solara's completion of a major deal in Poland and its continued progress on projects across Europe and South America.

Solara's management previously estimated that, pending deal closures, the company could connect around 700 megawatts (MW) of capacity by 2026. They also revealed exclusive, advanced due diligence for a Spanish portfolio of approximately 175 MW. Phoenix analysts David Gabai and Noam Waknin project Solara will connect about 700 MW by year-end, with 900 MW under construction and 1.4 gigawatt-hours (GWh) of storage systems in development or acquisition.

The Polish transaction involves Solara and Clal Insurance acquiring a 219-project portfolio totaling 268 MW, with Solara holding a 51% stake. This portfolio is expected to generate approximately 27.6 million euros in annual revenue and 18.4 million euros in EBITDA at 100% capacity. Phoenix views this as a turning point, adding already connected, revenue-generating assets. The potential Spanish acquisition, featuring 175 MW of connected assets with long-term power purchase agreements (PPAs), is projected to yield about 55 million shekels annually before storage additions.

Phoenix's most significant projections are for 2028, estimating Solara could bring about 2.2 GW of solar and 5.1 GWh of storage to commercial operation. These assets are forecast to generate roughly 1.05 billion shekels in annual revenue and 850 million shekels in EBITDA. A substantial portion of these projects are expected to be secured by 10-20 year PPAs, enhancing revenue visibility and reducing exposure to electricity price volatility. This aligns with Solara's CEO's expectation of moving to profitability in 2027.

Beyond electricity generation and storage, Phoenix also acknowledges Solara's ventures into water desalination and data centers in Chile, particularly the ENAPAC desalination project and the LIKAN-X data center initiative. These are seen as growth engines that could multiply the energy business's impact, with initial phases potentially operational by late 2028. Phoenix's valuation model assigns approximately 1.86 billion shekels to ready assets and 1.06 billion shekels to projects in development, with specific valuations for ENAPAC and EPC activities. The firm notes risks including electricity tariff volatility, construction costs, regulatory changes, currency and interest rate exposure, and inflation and climate risks.