WindForce is not a broken company. Its infrastructure is real, its contracts are government-backed, and the macro tailwinds — Sri Lanka's 70% renewable target by 2030, IFC partnership for a 100 MW solar plant, and a 130 MW battery storage system — are genuinely transformational. But at Rs. 43.3, you are paying 39.4x trailing earnings for a company whose profits fell 17% this year and are likely to decline further in FY27 before the new capacity (115 MW under construction) contributes meaningfully.
Three simultaneous headwinds converged in FY26: (1) Tax shields are expiring — Q4's income tax credit collapsed from Rs. 336M to Rs. 14M, turning what should have been a profitable quarter into a Rs. 150M parent loss. (2) CEB is a slow payer — trade receivables absorbed Rs. 2.19Bn of cash in FY26 versus releasing Rs. 871M in FY25, a Rs. 3.06Bn swing that halved operating cash flow. (3) The rooftop solar revenue stream is gone — Rs. 708M of SPPA billing in FY25 dropped to Rs. 649K in FY26, with the FY25 figure boosted by a Rs. 482M one-off disposal gain that will never recur.
The core thesis is: can the 115 MW pipeline and IFC solar project restore earnings growth fast enough to justify 39x P/E? The answer depends entirely on execution speed and CEB's payment behaviour — both beyond WindForce's control. This is a high-quality asset with poor near-term earnings visibility. Patient long-term investors with a 3-5 year horizon have a genuine case. Buyers at Rs. 43.3 expecting FY27 to be better than FY26 are likely disappointed.
| Segment | Revenue FY26 (LKR M) | Direct Cost (LKR M) | Gross Profit (LKR M) | GP Margin | % of Group GP | Total Assets (LKR M) |
|---|---|---|---|---|---|---|
| Wind | 3,184.8 | (2,052.6) | 1,132.2 | 35.5% | 26.7% | 14,305.4 |
| Solar | 2,016.3 | (626.9) | 1,389.4 | 68.9% | 32.8% | 11,131.1 |
| Overseas | 1,051.1 | (330.1) | 720.7 | 68.6% | 17.0% | 4,689.0 |
| Holding / Treasury | 1,251.1 | (443.5) | 807.6 | 64.5% | 19.0% | 28,086.4 |
| Hydro | 387.6 | (134.1) | 253.6 | 65.4% | 6.0% | 2,365.4 |
| Auto / EPC & Other | 520.6 | (416.9) | 103.7 | 19.9% | 2.4% | 390.9 |
| Elimination | (370.7) | 204.2 | (166.5) | — | — | (16,874.5) |
| Group Total | 8,040.9 | (3,799.9) | 4,241.0 | 52.7% | 100% | 44,093.7 |
The Auto / EPC segment (19.9% GP margin) is the weakest business in the portfolio — a construction/services business bolted onto a generation company. At Rs. 520.6M revenue and Rs. 103.7M gross profit it is small but dilutes overall margins. Longer-term, management should either scale this into a genuine EPC business or divest it.
The Holding segment showing Rs. 1,251M revenue with 64.5% margin likely reflects inter-company management fees, treasury income, and dividend flows rather than external revenues. Investors should view the Holding segment as consolidation plumbing, not an independent growth driver.
| Item | FY26 | FY25 | Change |
|---|---|---|---|
| Billing under SPPA (Rooftop Solar) | Rs. 0.6M | Rs. 708.5M | −99.9% |
| Gain on Disposal of Rooftop Solar Panels | — | Rs. 482.1M | −100% |
| Solar Segment Revenue (utility-scale) | Rs. 2,016.3M | N/A disclosed | Growing |
WindForce operated a rooftop solar / net-metering business (including subsidiaries like Sky Solar Private Ltd and Solar Universe Private Ltd — both recipients of IPO funds). During FY25, they sold (disposed of) these rooftop solar panel assets, realising a one-off capital gain of Rs. 482.1M. The SPPA billing of Rs. 708M represented ongoing revenue from these rooftop installations before disposal.
In FY26, both lines are gone. This means FY25's profit was materially inflated by two non-recurring items totalling Rs. 1.19Bn (Rs. 708M revenue + Rs. 482M disposal gain). Any comparison of FY26 vs FY25 that ignores this is misleading. On a like-for-like (continuing operations) basis, the revenue decline is more modest and the profit decline may be overstated.
The utility-scale Solar segment (Rs. 2,016M, 68.9% GP margin) is fully intact and growing. The part that disappeared is the low-capital rooftop business. WindForce is strategically pivoting from rooftop to large utility-scale solar — the IFC 100 MW deal is the proof point. This is the right direction: utility-scale has better margins, longer contracts, and more defensible competitive positioning.
| Tax Line | Q4 FY26 | Q4 FY25 | Change | FY26 Full Year | FY25 Full Year |
|---|---|---|---|---|---|
| Income Tax (Expense) / Credit | +Rs. 13.8M | +Rs. 336.5M | −96% | (Rs. 162.2M) | (Rs. 313.5M) |
| Dividend Tax | (Rs. 135.0M) | (Rs. 224.0M) | −40% | (Rs. 225.3M) | (Rs. 386.7M) |
| Total Tax Charge | (Rs. 121.2M) | +Rs. 112.5M | n/m | (Rs. 387.4M) | (Rs. 700.2M) |
| PBT (before tax line) | Rs. 102.9M | Rs. 90.9M | +13% | Rs. 2,487.0M | Rs. 2,949.9M |
| Effective Tax Rate | 117.8% | −123.8% (net credit) | — | 15.6% | 23.7% |
In Q4 FY25, WindForce received a net tax credit of Rs. 112.5M (income tax +Rs. 336.5M credit minus dividend tax Rs. 224M charge). In Q4 FY26, the same line became a net tax charge of Rs. 121.2M. This Rs. 233.7M swing — caused by the disappearance of the income tax credit — is precisely what converted a profitable Q4 into a loss.
Why does this happen? BOI (Board of Investment) tax exemptions for renewable energy projects in Sri Lanka typically cover a 5-10 year period from first year of profit. Mannar Wind Power Project (first operational ~2019-2022) and early solar assets are now reaching or passing their holiday windows. As each project's tax holiday expires, it begins paying the standard 30% income tax rate. This is a permanent, structural, year-on-year drag on net profit that will worsen before it stabilises — because new projects (115 MW u/c) won't generate taxable income immediately.
The Dividend Tax (paid on dividends received from subsidiaries) also remains a significant burden at Rs. 225M annually. Full-year effective tax rate of 15.6% in FY26 vs 23.7% in FY25 seems counterintuitive (lower rate = less tax = better?), but this is misleading: in FY25, a large deferred tax credit inflated the income tax line; in FY26, the underlying cash tax burden is higher as holidays expire.
| Cash Flow Item | FY26 (LKR M) | FY25 (LKR M) | Change |
|---|---|---|---|
| Operating Profit before WC Changes | 5,216.2 | 4,489.4 | +16.2% |
| (Increase) in Trade & Other Receivables | (2,188.4) | +871.4 | −Rs. 3,059M swing |
| (Increase) in Inventories | (271.7) | (419.7) | +35% better |
| Increase in Trade & Other Payables | 94.2 | 184.5 | — |
| Cash Generated from Operations | 2,926.8 | 5,115.3 | −42.8% |
| Interest / Tax / Dividend Paid | (1,545.7) | (1,976.0) | −21.8% |
| Net Cash from Operating Activities | 1,381.1 | 3,139.3 | −56.0% |
| Acquisition of PP&E (Capex) | (2,071.7) | (2,723.1) | −24.0% |
| Short-term Investments (Fixed Deposits) | (942.0) | (966.2) | — |
| Net Cash from Investing Activities | (2,275.3) | (929.4) | Much worse |
The Rs. 2.19Bn receivables increase is almost entirely attributable to CEB's chronically slow payment cycle. WindForce generates electricity every month and invoices CEB under Power Purchase Agreements (PPAs). CEB, facing its own financial constraints (post-economic crisis restructuring, subsidised tariffs, etc.), consistently lags on payments. As WindForce's installed capacity grew (new projects coming online throughout FY26), the volume of invoices increased — but CEB's payment speed did not keep pace.
This is not a sign of bad receivables or doubtful debt — the government guarantees CEB's obligations, so eventual collection is near-certain. But the timing mismatch creates genuine liquidity risk: WindForce must service Rs. 999M in finance costs and Rs. 2.07Bn in capex from Rs. 1.38Bn operating cash flow. The gap is bridged by debt drawdowns and short-term investments, but the structural pressure is real.
Watch for FY27: If CEB's payment cycle normalises (as IMF-backed fiscal reforms take hold), Rs. 1-2Bn of the trapped receivables should release back as cash inflow. This would restore operating cash flow to Rs. 3-4Bn range — a significant positive catalyst for the stock. Conversely, if CEB payments worsen, the cash position deteriorates further.
| Objective | Project | IPO Allocation (LKR) | Utilised (LKR) | % Used | Status | Notes |
|---|---|---|---|---|---|---|
| 1 | Mannar Wind Power Project | 927,000,000 | 927,000,000 | 100% | COMPLETE | Original budget. Q1 2022. |
| 1a | Cost Escalation — Mannar WPP | 1,573,000,000 | 1,573,000,000 | 100% | OVERRUN | 170% over original budget. Extra Rs. 1.573Bn from IPO funds. |
| 2.1 | Sky Solar Private Ltd | 79,500,000 | 79,500,000 | 100% | COMPLETE | Disposed of in FY25 |
| 2.2 | Solar Universe Private Ltd | 168,000,000 | 168,000,000 | 100% | COMPLETE | Disposed of in FY25 |
| 2.3 | Crane-less Wind Equipment | 25,000,000 | 25,000,000 | 100% | COMPLETE | — |
| 2.4 | Kebitigollewa Solar Power Project | 427,345,456 | 427,345,456 | 100% | COMPLETE | Operational |
| 2.5 | Safe Power International (Pvt) Ltd | 42,000,000 | 42,000,000 | 100% | IN PROGRESS | Completion: Q1 FY27/28 (Mar 2028) |
| TOTAL | 3,241,845,456 | 3,241,845,456 | 100% | |||
The original IPO prospectus allocated Rs. 927M for the Mannar Wind Power Project. The actual cost ballooned to Rs. 2,500M — a 170% overrun — with the extra Rs. 1,573M drawn entirely from IPO proceeds. This means 77% of the total IPO raised went to a single project that cost 2.7x its original estimate.
The project is now complete and operational (since Q1 2022), so there is no ongoing risk. But this overrun reveals a key governance concern: WindForce's prospectus-level cost estimation on major projects is historically unreliable. Given that 115 MW is currently under construction and the 100 MW IFC solar deal is being planned, investors should ask hard questions about contingency budgets and what funding gap exists if construction costs inflate again.
The two rooftop solar subsidiaries funded by IPO (Sky Solar, Solar Universe) were also subsequently disposed of in FY25 — raising the question of whether capital originally raised for long-term infrastructure was recycled through short-term asset disposals. The Rs. 482M disposal gain in FY25 partially validates this strategy as profitable, but it is worth noting.
The IFC partnership announced in 2026 is strategically significant beyond the funding. IFC's local-currency loan structure (via IDA21 Private Sector Window) means WindForce accesses USD-equivalent capital without USD repayment obligations — eliminating the FX mismatch that has crippled other Sri Lankan corporates. The 100 MW facility will generate approximately 220 GWh/year and create 3,000+ jobs. At a conservative tariff of Rs. 20/kWh, that is Rs. 4.4Bn in incremental annual revenue when fully operational — 55% growth on the FY26 base revenue base.
Combined with the 130 MW BESS and the existing 115 MW under construction, WindForce's strategic pipeline represents the potential to more than double its installed base from 253 MW to 600+ MW by FY30. That growth rate, if achieved, fully justifies a premium valuation. The question is not the destination — it is the timeline and execution quality.
| Metric | Value | Benchmark / Comment |
|---|---|---|
| Market Price | Rs. 43.30 | As of analysis date |
| NAV / Share | Rs. 18.72 | Tangible book value of infrastructure assets |
| P/B (Price-to-Book) | 2.31x | Paying 2.31x for assets worth Rs. 18.72. Requires strong earnings growth. |
| EPS (Group basis) | Rs. 1.55 | Group PAT Rs. 2,099M ÷ 1,354.3M shares |
| Trailing P/E (Group) | 27.9x | Elevated for declining earnings |
| EPS (Parent basis) | Rs. 1.10 | Parent PAT Rs. 1,491M ÷ 1,354.3M shares |
| Trailing P/E (Parent) | 39.4x | Extremely expensive for a company with declining earnings |
| EBITDA (FY26) | Rs. 4,705M | EBIT Rs.2,753M + D&A Rs.1,952M |
| Market Cap | Rs. 58.6Bn | 43.3 × 1,354.3M shares |
| Est. Net Debt | ~Rs. 9.0Bn | Interest paid Rs.999M ÷ ~11% avg rate; approx only |
| Est. Enterprise Value | ~Rs. 67.6Bn | Market Cap + Net Debt estimate |
| EV / EBITDA (trailing) | ~14.4x | India RE peers: 15-20x. Sri Lanka discount warranted. Near fair value. |
| Interest Coverage (EBIT/Fin.Cost) | 2.75x | Comfortable but not generous. Watch if earnings decline further. |
| D/E (Total Liab / Total Equity) | 0.60x | Manageable leverage for infrastructure |
FCFF-based. Base inputs reflect FY26 actuals. Flex the sliders to see how the valuation changes under different assumptions about revenue growth, margins, and cost of capital.
| Yr 1 | Yr 2 | Yr 3 | Yr 4 | Yr 5 |
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Base case (15% revenue CAGR, 56% EBITDA margin, 13% WACC, 5% terminal growth) implies a fair value in the Rs. 35-50 range — broadly consistent with the current market price of Rs. 43.3. This means at the base case, the stock is approximately fairly valued, with minimal margin of safety.
For the bull case to work (Rs. 70+ implied value), you need: the 115 MW under construction on time, the IFC 100 MW solar completed by FY29, BESS commissioned, CEB receivables normalising, and WACC falling as SL macro stabilises. All simultaneously. That is a high-conviction, high-concentration bet on policy execution.
The bear case (CEB delays, cost overruns on pipeline, tax rate normalising to 30%, WACC staying elevated) puts fair value at Rs. 18-25 — well below market price. The bear case is not implausible given FY26's evidence.