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Business News/ Markets / Stock Markets/  Suzlon Energy: Anand Rathi bullish on turnaround story, retains 'buy' rating
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Suzlon Energy: Anand Rathi bullish on turnaround story, retains 'buy' rating

Anand Rathi reiterates 'buy' on Suzlon Energy with ₹58 price target, highlighting market position and cash achievement. Wind energy currently contributes 10% of the total installed capacity of 442 GW, and projections indicate that it will ascend to 13% by 2030.

India holds the 4th position in the world for renewable energy installed capacity, including large hydro. It ranks fourth in both wind power capacity and solar power capacity. ((Getty Images/iStockphoto))Premium
India holds the 4th position in the world for renewable energy installed capacity, including large hydro. It ranks fourth in both wind power capacity and solar power capacity. ((Getty Images/iStockphoto))

In its most recent report, domestic brokerage firm Anand Rathi reiterated its 'buy' recommendation on Suzlon Energy with a price target of 58 apiece, emphasising the company's notable market position in India's wind turbine sector and the company's achievement with net cash totaling 11.4 billion in FY24, marking the first instance since FY06. 

The brokerage said that the country's wind capacity installations are on track to rise to 8–9 GW by FY27, given the government’s insistent thrust and traction from commercial and industrial demand.

The brokerage said that the company has faced turbulence in the past due to weak demand and high debt, hurting its prospects. However, its balance sheet turned around sharply, and with greater demand aided by ambitious government targets, it expects deliveries of 1.5–2 GW for FY25–26. 

Also Read: Multibagger Suzlon Energy stock hits 5% upper circuit after company secures new wind power project

Valuing the stock at a 35x PE on FY26e, considering robust growth prospects, the brokerage expects supportive government policies to sustain earnings growth and drive reratings. 

"Supportive government policies would continue to drive earnings and reratings. Limited competition is an additional positive even though structural issues like grid connectivity, land acquisition-related challenges and keener competition would determine the pace of earnings," said Anand Rathi. 

Impressive performance

The company on Friday delivered robust Q4 results, with EBITDA reaching 3.6 billion and PAT at 2.8 billion, marking a notable increase of 54% and 314% year-on-year, respectively. These figures surpassed the brokerage's projections of 3.2 billion for EBITDA and 2.6 billion for PAT.

Furthermore, for FY24, Suzlon reported EBITDA and PAT of 10.3 billion and 6.6 billion, representing year-on-year growth of 25% and 296%, respectively. The company's current wind turbine order book stands at 3.3 GW, predominantly comprising equipment supplies, which constitute 66% of the total. 

Also Read: BSE Power index records 107% surge in a year, 9 stocks jump between 100% and 400%

Notably, captive, commercial, and industrial (C&I) orders contribute significantly, accounting for 58% of the order book.

In terms of segment performance, wind turbine deliveries reached 273 MW in Q4 and 710 MW in FY24, compared to 664 MW the previous year. Q4 wind turbine EBIT stood at 656 million, a significant improvement from a loss of 152 million in the same period last year. 

For FY24, wind turbine EBIT amounted to 700 million, marking a notable recovery from a loss of 1 billion in the preceding year. 

Additionally, operations and management EBIT in Q4 reached 2.24 billion, up from 1.6 billion in the previous quarter, while FY24 EBIT stood at 7.4 billion, compared to 6.8 billion in the previous year. 

Furthermore, Q4 foundry and forgings EBIT increased to 216 million from 63 million a year ago, with FY24 EBIT at 267 million, rebounding from a loss of 32 million in the previous year.

Also Read: GAIL commissions its first green hydrogen plant under green hydrogen mission

On its 3.3 GW order backlog, the brokerage built in 1.5GW/2GW WTG deliveries in FY25/FY26 (FY17 1.78GW). Challenges in grid connectivity and land acquisition could delay delivery, impacting earnings.  

Favorable market conditions for the Indian wind industry

India holds the 4th position in the world for renewable energy installed capacity, including large hydro. It ranks fourth in both wind power capacity and solar power capacity.

India's ambitious goal of installing 500 GW of non-fossil fuel capacity by 2030, achieving net-zero emissions by 2070, and meeting 50% of its electricity needs from renewable energy sources by 2030 marks a momentous milestone in the global effort against climate change.

Also Read: State-run IREDA plans FPO in FY25 as loan demand for renewable projects rises

This growth trajectory will predominantly be steered by the wind and solar energy sectors. Wind energy currently contributes 10% (43 GW) of the total installed capacity of 442 GW, and projections indicate that it will ascend to 13% (100 GW) by 2030. 

Similarly, solar energy, which presently constitutes 19% (82 GW) of the total capacity, is forecast to burgeon to 38% (293 GW) by 2030, showcasing a substantial increase in its share of the overall power capacity.

 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 27 May 2024, 05:07 PM IST
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