Buy Suzlon Energy Limited For Target Rs. 72 by Geojit Financial Services Ltd
Higher Capacity Utilization Drives profitability Up
Suzlon Energy is a vertically integrated wind turbine manufacturer and O&M service provider with over 20.9GW of installed capacity across the globe
• Q1FY26 operating revenue surged 55% YoY to ?3,131.7 cr, driven by strong performance in the Wind Turbine Generator (WTG) segment, which delivered 444 MW, marking a 62% YoY increase.
• OMS division posted a modest 10% YoY revenue growth for the quarter, while the Forging division surged 60% YoY to ?146.49 cr. Suzlon’s share in Forging rose from 40% to 62%, driven by strong order execution.
• Gross profit rose 58% YoY, even as raw material costs jumped 85%, driven by effective price pass-through strategies that helped maintain profitability.
• Higher capacity utilization in the WTG and forging business, led to stronger operating leverage. As a result, EBITDA reached ?599.07 cr, with a margin expansion of 82.3 bps.
• Profit before tax (PBT) grew 52% YoY to ?459.23 cr. However, a ?134 cr deferred tax charge led to higher tax expenses, moderating the growth in profit after tax (PAT), which stood at ?324.32 cr, up 7% YoY over a high base.
Outlook & Valuation
Suzlon began FY26 on a strong note, with higher capacity utilization driving improved margins in the wind turbine segment. Backed by a robust 5.7 GW order book, we project a 42% CAGR in revenue over FY25–27E, supported by management’s guidance and strong delivery momentum. Enhanced utilization is expected to unlock volume leverage, leading to a 117 bps margin expansion, primarily from the WTG and forging businesses. With earnings forecasted to grow at 43% CAGR and ROE rising to 27.1% by FY27E, the stock appears undervalued at 27.7x FY27 EPS. Suzlon’s ALMM compliance and backward integration offer a strong competitive moat, but sustaining margin discipline remains key to preserving pricing power. Factoring in execution risks, we revise our valuation multiple to 35x (from 38x earlier) FY27E EPS of ?2.2 to arrive at a target price of ?75, upgrading our rating to a BUY recommendation.
Key Highlights
• Suzlon’s order book has exceeded 5.7 GW, reflecting 10 straight quarters of growth, fuelled by strong demand from Commercial & Industrial (C&I) and PSU segments. This ensures healthy visibility for the next 2–3 years, despite challenges like PPA delays and land acquisition.
• To address project execution delays, Suzlon is prioritizing land-ready projects and building a pipeline through advance land acquisition. This strategic shift is expected to enhance commissioning timelines starting in FY27.
• SE Forge Expansion & Export Outlook Backed by ALMM and BIS regulations, Suzlon plans to expand its SE Forge operations. Export opportunities in neighbouring countries, the Middle East, and Europe are expected to gain momentum later this year.
• Policy Alignment & Industry Support Management views the MNRE’s Wind ALMM amendment as a transformative policy that boosts domestic manufacturing and supply chain resilience. Suzlon is fully compliant and well-positioned to benefit from this shift
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