Suzlon Energy stock downgraded by Morgan Stanley after doubling YTD, target price still raised

In the last one year, Suzlon Energy has rallied 217 percent, more than doubling investors' capital. In comparison, Nifty gained 30 percent during this period.

Shares of Suzlon Energy fell marginally after the stock was downgraded by Morgan Stanley to 'equalweight' from its earlier rating of "overweight." However, the international brokerage raised its price target on the wind energy solutions provider stock to Rs 88 per share from R 73 earlier, implying an upside of 8 percent from Thursday's closing price.

Suzlon's shares have doubled in value over the last six months, having risen 111 percent and outperforming the Nifty 50 which rose around 31 percent during this period. This outperformance was driven by the strong increase in order book and its improved balance sheet along with cash flows from operations, noted Morgan Stanley.

Suzlon's order book is now at an all-time high, near the mark of 5 GW. Analysts at Morgan Stanley believe that Suzlon continues to be a strong beneficiary of India's wind energy growth story amidst benign competition and has the potential to increase its market share to between 35 percent and 40 percent going forward.

Additionally, ordering activity in the renewable energy space remains strong and they expect 32 GW of new orders over FY25-30.

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"Suzlon has been prudent in taking up orders and the same is also reflected in its high share of C&I and captive customers and the large order from NTPC. But it cannot be completely insulated on execution risks, which are system-related or client specific," Morgan Stanley wrote in its note.

The acquisition of Renom by Suzlon provides the company an entry into the new multi-brand O&M business and Morgan Stanley is awaiting customer sign ups in this business, which will add to Suzlon's earnings growth.

However, post the recent run-up, the brokerage sees Suzlon's risk-reward as more balanced and wants to see stronger execution as compared to its base case before it turns constructive on the stock again.

In the same report on power companies, Morgan Stanley upgraded Tata Power to an 'overweight' rating from 'underweight' and raised the price target to Rs 577. The brokerage maintained its 'overweight' stance on NTPC, lifting the target to Rs 496, but downgraded Power Grid to 'equalweight' from 'overweight,' while increasing the target price to Rs 362 from Rs 296.

At 12 noon, Suzlon Energy shares were trading largely flat at Rs 81.46 on NSE. So far this year, the stock has gained 111 percent, compared to an 18 percent rise in benchmark Nifty. In the last one year, the counter has rallied 217 percent, more than doubling investors' capital. In comparison, Nifty gained 30 percent during this period.

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