Suzlon Energy stock price target raised on positive outlook; analysts see 20% upside

In the last one year, Suzlon Energy stock has delivered substantial returns of around 339 percent, compared to 24 percent rise in benchmark Nifty 50.

Suzlon Energy stock has gotten a target price upgrade from ICICI Securities as analysts believe that it has been a real turnaround year for the company, with becoming net debt free, strong execution growth of 10 percent to 710MW and order inflow of 3.1GW in FY24.

Even as the firm reported subdued earnings for the quarter ended March 2024, the brokerage retained a 'buy' rating on the stock and raised the target price to Rs 54 from Rs 48 earlier.

For Q4FY24, Suzlon Energy's revenue grew 30 percent on-year to Rs 2,200 crore, and EBITDA rose 53 percent YoY to Rs 360 crore and adjusted PAT jumped 4.1x YoY to Rs 250 crore.

The company reported a strong order inflow of 3.1GW in FY24 and 402MW in FY25-YTD, robust order backlog of 3.3GW while order inflow pipeline remains strong.

This provides strong visibility of execution growth in the medium term and thus improves the profitability of the wind turbine generator (WTG) segment, too, said ICICI Securities.

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Why ICICI Securities is bullish on Suzlon

According to the brokerage, 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 a cash reserve of Rs 1,100 crore, after a successful equity raise worth Rs 2,000 crore in Q2FY24 for debt reduction.

Moreover, major positive changes in regulatory policy and eventually on the business front bode well for the wind industry. Suzlon Energy, being the market leader in the wind turbine industry, is the natural beneficiary of this shift, said ICICI Direct in its report.

The outlook for the wind industry is positive over medium to long term, as 10GW of wind opportunity is likely to be floated over FY23-27E. Also, given the increasing complexity of RE power projects (from plain vanilla solar or wind to hybrid, RTC and now FDRE), analysts at ICICI Direct believe wind may play a crucial role in RE generation going ahead.

Meanwhile, JM Financial has also reiterated its bullish call on Suzlon Energy stock.

"With a healthy order book and healthy bid pipeline, strengthening of balance sheet and the organization, amidst the execution challenges for step-up in annual capacity addition beyond 5GW, we maintain our buy rating on the stock with an unchanged target price of Rs 54," the brokerage said.

Also Read | Suzlon Energy Standalone March 2024 Net Sales at Rs 1,428.61 crore

Catalysts for Suzlon Energy stock

Suzlon Energy has started bidding for PSU (including NTPC) tenders, JM Financial noted. Since January 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, the brokerage said.

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

With increasing deliveries of WTG, EBITDA for Suzlon Energy 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 percent), diversity in orders from seven states, a higher share of non-EPC orders (66 percent) and a favourable 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," said JM Financial in its report.

Also Read | Suzlon Energy stock falls 5% as firm reports 9% drop in Q4 net profit

At 2:07 pm, Suzlon Energy shares were trading nearly 1.09 percent lower at Rs 45.45 on NSE. So far in the day, a total of three crore shares of the company changed hands on BSE and NSE combined compared to 1-week average trading volume of 3 crore equity shares.

In the last one year, the stock has delivered substantial returns of around 339 percent, compared to 24 percent rise in benchmark Nifty 50.

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