With the world looking at the transition to sustainable energy as the only viable solution to the devastating effects of climate change, investors’ eyes have locked onto this wind turbine manufacturer based in Pune.
Shares of Suzlon Energy have rallied 25 percent in a week and generated a return of 67 percent in a month. Enthusiasm for the stock is because the share of renewable energy (RE) in the country’s overall power mix is expected to increase substantially by 2030. And also because of the union government’s emphasis on power for everyone, which has accelerated capacity expansion.
Suzlon Energy primarily manufactures wind turbine generators, forging and foundry components, and provides operations and maintenance support. Wind turbine generators sales powered 67 percent of its revenues in FY22-23, followed by monies from its operations and maintenance services division, which contributed 28 percent of revenues. Component sales comprised 7 percent of its revenues.
The wind energy behemoth recently reported its earnings. During the quarter ended March 2023, consolidated net profit jumped 237 percent year-on-year (y-o-y) to Rs 279.89 crore, but net sales were down 31.5 percent to Rs 1,694.08 crore.
Why are analysts blown away?
The installed capacity of wind power is expected to increase by around 8GW annually, to reach the targeted 100 GW by 2030, analysts have said.
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Further, the Ministry of New and Renewable Energy will invite annual bids for interstate transmission-connected RE capacity of 50GW (of which 10 GW is wind energy) during FY24-30. This has also brightened the outlook for companies in the renewable energy sector.
“With 33 percent market share in India and a presence across 17 countries, Suzlon is the leading OEM (original equipment manufacturer) in India’s RE sector,” highlighted Emkay Global Financial Services.
To tackle the strong demand, Suzlon is well equipped with a strong product suite and a much-improved balance sheet now compared with FY20 due to the recent debt deleveraging exercises conducted by the company, the brokerage firm pointed out.
By the fiscal year 2022-23, their net debt had decreased to Rs 1,180 crore from Rs 13,000 crore in the fiscal year 2019-20. According to Emkay, this was possible because the company refinanced the debt and also successfully issued new shares worth Rs 1,200 crore in 2022.
Stock price and shareholding data
Though Suzlon’s share price has not moved much in the past 10 years, from around Rs 9 in June 2013, the stock has climbed to Rs 14 today. In June 2014, the stock had shot up to Rs 30, but gradually declined from that level.
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While the promoters and domestic institutional investors (DII) have cut their exposure to the stock, foreign institutional investors (FII) and retail shareholders have raised their stake in the wind energy company.
Promoters have trimmed their shareholding to 14.5 percent as on March-end 2023, from 18.9 percent as on June end of 2020, while DIIs have also decreased their stake dramatically to 5.5 percent from 16.4 percent in that period.
On the other hand, FIIs lapped up the stock and increased their shareholding to 7.64 percent from 2.93 percent, while the stake of retail investors has grown to 72.3 percent from 61.7 percent.
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