Buy Suzlon Energy Limited For Target Rs. 72 by Axis Securities Ltd
Investment Rationale
* Strong Orderbook: As of May’25, the company had its highest-ever orderbook of 5.5 GW. 80% of the orderbook consists of C&I and PSU orders. It also has a strong ordering pipeline. The order book provides revenue visibility for the company for the next 2-3 years.
* Improvement in execution: In FY25, the company’s deliveries were 1,550 MW, up 118% YoY. It has a strong execution capability along with a manufacturing capacity of 4.5 GW. The management expects its orderbook of 5+ GW to be executed in FY26 and FY27, implying a strong pickup in execution.
* Strong Revenue Growth: The company’s revenue grew at a CAGR of 70% from FY20 to FY25 to Rs 10,851 Cr., led by improvement in execution. Its revenue is expected to grow at a ~40% CAGR over FY25-FY27 to Rs 21,275 Cr. Suzlon has guided for a 60% growth for FY26.
* Capacity Expansion: The company revamped its Puducherry and Daman Nacelle facilities in Q3FY25, and now its total manufacturing capacity has increased from 3.2 GW to 4.5 GW. It plans to add two additional production lines at its Ratlam and Jaisalmer facilities to scale operations.
* Strong O&M business: The company’s asset under management under its O&M business has increased from 2.5 GW in FY24 to 3.0 GW by FY25. The FY25 revenue from this segment was Rs 220 Cr, up 3% YoY. The segment has stable annuity-like cash flows with an annual escalation of 4-5%.
* Positive Macro Outlook: The CEA forecasts India’s total Wind Energy Capacity to increase to 73 GW by FY27 and 122 GW by FY32. As of Jun’25, India’s wind capacity stood at 52 GW. The CEA targets require an annual wind capacity addition of 10 GW per annum, which is aligned with the MNRE targets of 10 GW of wind capacity tenders up to FY28.
* ALMM Boost: MNRE has recently announced the implementation of ALMM for wind, making it mandatory to use major wind turbine components from the 'Approved List of Models and Manufacturers (Wind Turbine Components). This implementation is positive for the local WTG manufacturers like Suzlon.
Valuation & recommendation:
* The company is in a position to benefit from the tailwinds in the Indian RE sector. The company has strong revenue visibility with expected improvement in execution and a strong order book. We recommend a BUY rating on the stock with a target price of Rs 72.0/share, implying an upside of 10% from the CMP.
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