Suzlon Energy shares: Nuvama Institutional Equities said that while it remains long-term constructive on Suzlon Energy, the increase in order inflows and profits has already been priced in, as the company prices at 40 times FY27E EPS of the WTG division.
Suzlon Energy Ltd, whose shares are up 58% in 2024 and 220 percent in the last year, published a robust set of June quarter results, with its operating margin greatly above Street forecasts and driving up profit after tax (PAT) by three times YoY. While Nuvama Institutional Equities remain long-term positive on Suzlon Energy, the increase in order inflows and profitability has already been accounted for, as the company already prices at 40 times expected FY27 earnings per share (EPS) from the wind turbine generator (WTG) division.
Nuvama Institutional Equities’ Update
Nuvama Institutional Equities remains positive about Suzlon Energy in the long term. However, they note that the increase in order inflows and profitability appears to be already reflected in the stock’s current price. Suzlon Energy is currently priced at 40 times the expected FY27 earnings per share (EPS) from its wind turbine generator (WTG) division. Nuvama has set a target price of Rs 64 for the stock and has downgraded it from ‘Buy’ to ‘Hold.’
“We maintain a positive long-term outlook on both the sector and Suzlon Energy. However, the anticipated rise in order inflow from the second half of FY25 seems to be already reflected in the current market price,” Nuvama noted, setting a target price of Rs 64 for the stock.
Strong Results and Share Performance
Suzlon Energy’s shares have surged by 58% in 2024 and 220% over the past year. The company reported impressive results for the June quarter, with its operating margin significantly exceeding Street forecasts. This performance led to a threefold increase in profit after tax (PAT) year-on-year.
The brokerage has adjusted its Suzlon Energy FY25-27 estimates to account for slightly lower realization per MW and an increase in FY27E execution to 3GW from 2.9GW. It lowered the stock from ‘Buy’ to ‘Hold’.
Suzlon Energy increased execution to 274 MW in the quarter, compared to an estimate of 250 MW, leading to a 50% YoY increase in sales at around Rs 2,020 crore versus Nuvama’s projection of Rs 2,130 crore. The minor top-line miss was attributable to quarterly variations in revenue per MW. Nuvama anticipates execution to increase further, with 1.4 GW planned for FY25, 2.4 GW for FY26, and 3 GW for FY27.
Suzlon Energy’s order inflow was 1,162 MW vs an estimate of 800 MW, resulting in an all-time high order book of 3.8 GW. This would be carried out over 18-24 months, providing revenue visibility. Nuvama expects Suzlon Energy to continue to benefit from the increased mix of FDRE/RTC/Hybrid in government tenders.
Suzlon Energy announced a net cash position of Rs 1,200 crore at the end of Q1FY25, showcasing the management’s efforts to clean up the balance sheet. Consequently, Suzlon now directly qualifies for bidding on NTPC, PSU, and government contracts. Suzlon is also a prominent player in the C&I area (two-thirds of OB) and benefits from a duopolistic market in EPC capabilities, maintaining an overall 30% market share (35.5 percent in Q1FY25).
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