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‘Real turnaround year’: Suzlon Energy shares get target price revision from ICICI Sec

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‘Real turnaround year’: Suzlon Energy shares get target price revision from ICICI Sec

Suzlon Energy has got back into shape after a tumultuous period over the last decade. Over the past three years, it has reduced its debt from Rs 12,000 crore in FY20 to nil in FY24 through various debt to equity conversions.
A couple of brokerages have maintained ‘Buy’ rating on Suzlon Energy Ltd post it March quarter results. While upgrading its target price on the stock, ICICI Securities said it has been a real turnaround year for Suzlon Energy, with becoming net debt free, strong execution growth of 10 per cent to 710 MW and order inflow of 3.1 GW in FY24. JM Financial maintained its ‘Buy’ rating on the stock and did not tinker with the target price
For Q4FY24, revenue for Suzlon Energy was up 30 per cent YoY, Ebitda was up 53 per cent YoY and adjusted profit after tax was up 4.1 times YoY. ICICI Securities said Suzlon’s strong outlook on order inflow and execution growth in medium term made it maintain ‘Buy’ on the stock with a revised target price of Rs 54 per share from Rs 48 earlier.

The brokerage has revised its FY26 estimate for Suzlon Energy on the back of strong order inflow in Q4FY24. Total order inflow in FY24 stood at 3.5 GW and thus order backlog stood at 3.3GW. It revised FY26 Ebitda estimate by 5 per cent to Rs 2,750 crore and profit by 11 per cent to Rs 2,100 crore.
“Suzlon has got back into shape after a tumultuous period over the last decade. Over the past three years, it has reduced its debt from Rs 12,000 crore in FY20 to nil in FY24 through various debt to equity conversions. With that, it has recently become net cash positive with cash reserve of INR 11bn as of Mar’24, after a successful equity raise worth Rs 2,000 crore in Q2FY24 for debt reduction,” it said.

ICICI Securities said major positive changes in regulatory policy and eventually on business front bode well for the wind industry. The government has decided to tender out at least 10 GW of wind capacity every year with pickup in demand from commercial and industrial entities for round-the-clock power supply, it noted.

Suzlon Energy, being the market leader in wind turbine industry, is the natural beneficiary of this shift, in our view,” it said.

Earlier, JM Financial in a note said Suzlon Energy’s present is promising while its future is cautiously bright. This brokerage maintained its ‘Buy’ recommendation on the scrip with an unchanged price target of Rs 54 per share.

Suzlon Energy has started bidding for PSU (including NTPC) tenders, JM Financial said. Since Jan 1, 2023, a total of 44 tenders with 43GW for utility-scale
vanilla wind and various wind-combinations have been issued, which have an estimated wind component of 15GW, giving a healthy pipeline of opportunities going forward, it said.

“This excludes opportunities from C&I segment. The company doesn’t anticipate an increase in intensity of competition, given the large market size, limited players and it being only turnkey OEM player,JM Financial said.

With increasing deliveries of wind turbine generator (WTG), Ebitda for Suzlon Energy Ltd sharply improved in FY24 and FY23. The installed capacity base for the Operations & Maintenance Services (OMS) business increased to 14.7 GW in FY24 from 13.9 GW on FY23.

“Current order book of 3,372 MW is due for execution up to FY26, with a major part to be delivered during FY25 as per the guidance from the management. Going forward, an increasing share of C&I projects (58%), diversity in orders from 7 States, higher share of non-EPC orders (66%) and a favorable policy environment (pooling of tariff) bode well for execution. However, availability of land and ROW (Right of Way) remain challenges for a significant scale-up,” it said.

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