SUZLON ENERGY: GEOJIT FINANCIAL SEES MORE UPSIDE POTENTIAL, SHARES TARGET PRICE
Suzlon Energy, the buzzing multibagger of Dalal Street, has seen some fresh interest from Geojit Financial Services Ltd. The brokerage firm has initiated coverage on the renewable energy player with a 'buy' rating and its target price suggests a 20 per cent upside in the stock from Friday's lows on the back of higher margins, improved capacity and increasing revenues.
Global Wind Energy Council (GWEC) expects India to reach 122GW of installed wind capacity by FY32E. Moreover, the government plans to conduct 10GW of exclusive wind tenders per annum until 2027. This signals an upcycle for wind OEMs like Suzlon Energy, said Geojit Financial Services in its initiating coverage report.
"We forecast the consolidated revenues of Suzlon to grow at 53 per cent CAGR in FY24-26E period. Wind Turbine Generator (WTG) segment revenues are expected to exhibit a 72 per cent CAGR driven by higher delivery volumes. Foundry and forging capacity utilizations will hence improve in FY26E in order to meet this demand," it said.
Shares of Suzlon Energy were seen at Rs 61 on Friday, but later rose more than 3 per cent to Rs 62.99 during the trading session. The company's total market capitalization stood above Rs 85,500 crore mark. The stock, after hitting its 52-week high at Rs 63.74, finally settled at Rs 61.46 on Thursday.
Shares of Suzlon Energy have zoomed nearly 700 per cent in the last 15 months, while the stock has rallied more than 265 per cent from its 52-week lows at Rs 17.43 a year ago. The stock has rallied nearly 65 per cent in 2024 so far, while it is up 15 per cent in the last one month.
Improved executions, cost optimization from better work-force management and better pass-through of commodity prices are expected to enable WTG margin improvement from 2 per cent in FY24 to 7 per cent in FY26E, said Geojit. WTG contributions in the EBIT mix could reach 46 per cent as higher deliveries propel growth, the domestic brokerage added.
Suzlon Energy Ltd reported a more than triple net profit at Rs 302 crore in the quarter ended on June 30, 2024. The wind energy solutions provider reported revenue from operations in the reported quarter at Rs 2,016 crore for the first quarter of the current financial year, registering an uptick of 50 per cent on a yearly basis.
Ebitda for the reported quarter rose nearly 86 per cent to Rs 370 crore in Q1FY25, from Rs 199 crore in Q1FY24. Ebitda margins grew sharply to 18.4 per cent from 14.8 per cent. Suzlon Energy's balance sheet remains strong with a net cash position of around Rs 120 crore.
But this could lead to only marginal expansion in consolidated EBIT margins, 13 per cent in FY26E, as WTG businesses have lower margins, it said. "Suzlon 2.0 is a de-levered, optimised, profit making business which has done away with its troubled past and is looking at a vibrant landscape of opportunities in India and abroad."
Suzlon’s revenue CAGR & ROE are expected to surpass those of the industry peers for FY24-26E. "We anticipate order inflows to be strong in this period, supported by strong government tendering and from commercial and industrial customers. We expect the revenue CAGR of 53 per cent to drive the EPS growth of 66 per cent CAGR, resulting in ROE improvement," it added with a 'buy' rating and a target price of Rs 73.
Among other brokerage firms, JM Financial has a 'buy' rating with a target price of Rs 71 on the stock, while Anand Rathi Shares & Stock Brokers and Nuvama Institutional Equities have suggested to 'hold' the Suzlon Energy with target prices of Rs 69 and Rs 64, respectively.
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2024-07-26T05:47:30Z dg43tfdfdgfd