Suzlon Energy: One of the main renewable energy sources that the nation now has access to is wind energy. There are wind farms in nine states, mostly in the western and southern regions. possessing a 43,198.98 MW installed capacity. The government is attempting to shift away from fossil fuels, which exert a significant strain on the national budget. Additionally, reduce dependency on fossil fuels, as they contribute to global warming.

Industry Outlook Of Suzlon Energy

Wind energy is one of the oldest sources of energy in the history of mankind. With the advent of technology and awareness regarding net carbon emissions wind energy provides a promising alternative for the generation of power in the future.

The global wind energy market is segmented based on type, application, and region. In terms of type, the market is segmented into offshore, and onshore. Offshore wind energy farms refer to those power generation farms that are established on the water bodies or close to the coastline, while onshore wind energy farms refer to those that are set up on the land.

The primary advantages of offshore wind energy farms are the constant gush of strong winds and, the large-scale setup provides higher power generation capacity. As India has a huge coastline offshore wind energy farms have promising growth prospects.

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The onshore wind farms are easy to install and involve low cost of installation and maintenance. This wind energy industry has seen significant growth over the years with over 743 gigawatts of installed capacity by the end of 2020.

Investment in wind power energy has also reached close to $ 150 billion as of 2024 and is expected to grow at a steady pace of 14% CAGR, with the USA, Europe, China, and India being the leading parties, fueling the growth.

Company Overview Of Suzlon Energy

Suzlon Energy is a multinational company engaged in the manufacturing of wind turbines and is headquartered in Pune, Maharashtra, India. Started by Tulsi Tanti in 1995, it soon became a major player in the wind power industry in a matter of 2 decades. Suzlon is India’s leading renewable energy solutions company providing 360-degree packages to its consumers which covers the needs of wind projects in entirety.

It also provides operation and management services for all the Wind turbine generators sold. Suzlon Energy adopted a business model wherein clients would bear 25% of the initial cost and remaining Suzlon would raise on loan. The company has already installed 20,680 MW of wind projects across 17 countries. Suzlon also boasts of 90% repeat customers and has 14 manufacturing and 8 R&D facilities across the world.

Suzlon, provides turnkey solutions- from design to lifecycle asset management. Suzlon Energy has operations in all the wind heavy states and has a market share of 27% in installed wind turbines segment.

Suzlon Energy Stock Analysis

The rise and fall of the share price Of Suzlon Energy

The reason for the crash in Suzlon’s share price from a high of ₹400+ in Jan 2008 to ₹30 in the aftermath of the financial crisis of 2008 and finally to the lifetime low of  ₹1.6 in 2018 could be attributed to its poor lender diligence and inability to gain momentum after the subprime crisis, as well as, the change in government incentive schemes for the industry which had initially given a boost to this industry.

The debt taken in 2007 to finance the acquisition of German company RE Power earlier known as Senvion also proved to be a bad bet which eventually led them to sell it to Centre Bridge. This resulted in their financials being murky. 

Turnaround Story Of Suzlon Energy

However, the latest change in the management of the company and the government’s focus on renewable energy sources, have again promulgated the company by giving it a better platform to play and expand its market share. The company has been almost debt-free in the last 5 years while expanding its profit at a pace of 19.8% CAGR for the last 5 years.

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Financial Highlights Of Suzlon Energy

Financial Year2024 (Mar)2023 (Mar)2022 (Mar)2021 (Mar)2020 (Mar)
Revenue (Crores)6,529 Cr.5,971 Cr.6,582 Cr.3,346 Cr.2,973 Cr.
Net Profit (Crores)660 Cr.2,887 Cr.-177 Cr.104 Cr.-2,692 Cr.
Operating Profit Margin (%)16%14%14%16%-29%
Return on Capital Employed (%)24.70%21%22%11%-48%
Debt110 Cr.1,905 Cr.6,390 Cr.6,858 Cr.9,686 Cr.
Earnings per share₹ 0.49₹ 2.28₹ -0.17₹ 0.1₹ -4.01

Revenue: The revenue of Suzlon Energy has also improved and almost doubled from an approximate level of ₹3000 Cr. to ₹6500+ Cr. This could be attributed to its rising order book value as well as the government’s push towards renewable energy.

Net Profit: The profits of the company have also improved and have become net positive to ₹ 660 Cr. from ₹-2,692 Cr., although steady YoY growth in net profit is needed for further confidence of investors.

Return on Capital Employed: Suzlon has shown steady growth in its ROCE over the last  5 years by turning the tides in its favor from -48% to 24.7% through better utilization of the funds of the company.

Borrowings: Suzlon Energy was also greatly successful in cleaning its books of account over the last 5 years by dramatically reducing its debts, which were close to ₹10,000Cr. to just ₹110 Cr. These remarkable feats gave the company a significant push to reach the helm of the race, and have also acted as a moat against its competitors.

Order Book Value

Wind Order Book (In MW) of Suzlon Energy has shown steady growth and the company looks to improve it further in the coming years. Suzlon has recently received its largest deal of 642 MW from Evren, a Brookfield entity. They also received an order of 551MW on 29th May 2024 from Aditya Birla Group which is to be installed in Barmer, Rajasthan, and Bhuj, Gujarat.

Order Book Of Suzlon

Competitors Of Suzlon Energy

Adani Green Energy Limited: It was incorporated in 2015, is a holding company of several subsidiaries carrying business of renewable power generation within the group and is primarily involved in renewable power generation and other ancillary activities.

Inox Wind: Suzlon Energy is a part of the Inox Group. The company is engaged in the business of manufacturing Wind Turbine Generators (WTGs) and is a wind energy solutions provider servicing IPPs, Utilities, PSUs, Corporations, and Retail Investors. Inox Wind Ltd is a fully integrated player in the wind energy market and provides end-to-end turnkey solutions.

KPI Green Energy Limited: KPI Green was Incorporated in 2008 is a part of KP Group. They develop, build, own, manage, and maintain renewable power facilities (solar and wind-solar hybrid power projects) as an Independent Power Producer (IPP) and as a service provider to Captive Power Producers (CPPs) under the ‘Solarism’ brand.

Key Metrics of Competitors

MetricsAdani GreenInox WindKPI Green Energy
Market Capitalisation₹ 2,98,170 Cr.₹ 19,746 Cr.₹ 10,848 Cr.
Current Market Price₹ 1,805₹ 141₹ 1,788
Price to Earnings Ratio236(Not Profitable)67.1
Book Value₹ 47.3₹ 13.0₹ 139
Dividend Yield %0.00 %0.00 %0.06 %
ROCE9.81%4.25%21.6 %
Debt to Equity Ratio8.651.911.24
Promoter Holdings56.37%52.88%53.08 %
FII Holdings18.15%10.32%5.6 %

ESG

Suzlon Energy believes that the primary goal of a business revolves around creating shared value and with this in mind the very business of wind energy was started. Sustainability at Suzlon refers to sustainable development, defined as development that ‘meets the needs of the present without compromising the ability of future generations to meet their own needs.

Suzlon Energy also acknowledges the importance of preserving the rights of future generations is as important as protecting the rights of the present generation. Which it aims to achieve through its integration of environmental, social, and economic values into business operations.

SWOT Analysis

Drivers: Suzlon Energy’s primary driver its ability to clean up its books of accounts has played a critical role in providing a good moat over its competitors, who are struggling with a significant amount of debt in the current scenario, especially when the interest rates are high. Secondly, the government’s push towards developing renewable sources of energy to meet the goal of “Paris Climate Change” has also helped the company in getting a healthy order book.

Restraints: However, the biggest challenges in this segment are the heavy investments needed along with pressure on margins and new competitors cropping up every other day in a small market. Apart from this, there exist other geographical challenges in establishing large-scale wind farms across the country. There is also a constant pressure of high maintenance which the company bears.

Price Target

Nuvama: Shares of Suzlon Energy are being covered currently by Nuvama, which has given price targets of ₹54 based on a 30 times FY26 EPS, backed by the wind sector’s structural upturn and the improving financials of Suzlon Energy. 

Religare Broking: According to Rohan Shah the price can move up to ₹60 as there is significant improvement in the financials of the company considering other factors.

Mehta Equities: Tapse believes that the recent resignation by the independent director would cause short-term pain but he believes ₹44-45 is a good level to buy with ₹66-75 as a target as he believes the company’s net debt-free position would help it in the long run.

Future Plans Of Suzlon Energy

Suzlon Energy expects to reach a wind installation capacity of 5 gigawatts in FY ’25 from the current 3 gigawatts capacity while it plans to expand its market share by another 3% to 30%. Suzlon Energy is also exploring offshore wind projects in Tamil Nadu and Gujarat. Suzlon is also looking to expand its OMS (operation and maintenance services) cautiously.

Key metrics Of Suzlon Energy

MetricsSuzlon Energy Ltd.
Market Capitalisation₹ 63,969 Cr.
Current Market Price₹ 50.2
Price to Earnings Ratio89.6
Book Value₹ 2.91
Dividend Yield %0.00 %
ROCE24.70%
Debt to Equity Ratio0.04
Promoter Holdings13.28%
FII Holdings19.57%

Conclusion

Finally, with the resignation of Suzlon Energy’s Independent Director Marc Desaedeleer due to issues of corporate governance and lack of transparency as alleged by him, it will be interesting to see if will it have a long-term impact on the company or not. However, according to Nuvama, this is just an opportunity to buy on dip as the brokerage house feels this won’t affect its ”BUY” rating for the stock.

Written By Dipangshu Kundu

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