Buy Suzlon Energy Ltd For Target Rs.56 By Geojit Financial Services Ltd
Suzlon Energy is a vertically integrated wind turbine manufacturer and O&M service provider with over 21 GW of installed capacity across the globe.
* Suzlon delivered a strong start to FY27, reporting its highest-ever Q1 deliveries of 506MW, up 14% YoY. Commissioning activity surged 2.3x YoY to 269MW, while realizations improved 12% to Rs.6.3 cr/MW, supported by a richer EPC-led project mix.
* Revenue grew 22.3% YoY to Rs.3,829cr, led by a 27.2% rise in Renewable Energy Solutions revenue to Rs.3,147cr, while RE AMS revenue increased 8.1% YoY to Rs.632cr.
* Gross margin contracted 410bps YoY as higher EPC mix and lower inventory drawdown accelerated cost recognition, limiting gross profit growth to 9%.
* Margin fell 358bps YoY to 15.5%, with flat EBITDA of Rs.595cr., as Suzlon 2.0 investments and deferred deliveries diluted operating leverage.
* PBT declined 15% YoY to Rs.389cr. on higher depreciation and finance costs while a lower tax charge cushioned PAT to Rs.305cr.
Outlook & Valuation
The company’s evolution under Suzlon 2.0 expands its addressable market and diversifies beyond standalone turbine sales. While a higher EPC mix and increasing DevCo investments are likely to raise capital intensity, with ROCE moderating from ~37% in FY26 to ~23% by FY28E, we believe these investments can strengthen long-term growth visibility. Our estimates remain conservative relative to Street expectations and already factor in near-term margin pressures and execution risks. Given its net-cash balance sheet, ~19% ROE and ~25% earnings CAGR, we value the stock at 28x FY28E Adj. EPS of ?2.0, implying a target price of ?56, and upgrade to a BUY rating. Key downside risks include slower S175 adoption, weaker DevCo economics and higher working capital intensity, while faster margin normalisation, stronger execution and accelerated scaling of Suzlon 2.0 initiatives present upside risks.
Key Highlights
* The DevCo platform has gained meaningful traction, contributing over 600MW of orders within four months and accounting for nearly 60% of recent order inflows, potentially improving site readiness, execution visibility and project conversion rates.
* Suzlon secured its first S175 order during the quarter, and management expects the platform to drive future growth through higher MW output per factory, making domestic adoption a key determinant of FY31 targets.
* The company continues to expand into project development, solar, battery storage and hybrid solutions under Suzlon 2.0, positioning itself as an integrated renewable-energy solutions provider rather than solely a turbine OEM.
* Management highlighted opportunities across Europe, Australia, Latin America and Southeast Asia, although commercial scale-up is likely to require 18-24 months, leaving domestic execution as the primary near-term growth driver.
* Management estimates India's repowering potential at roughly 25GW and expects pilot projects and initial order conversion over the coming quarters, creating a potential medium-term demand opportunity for newer turbine platforms.
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