Buy Suzlon Energy Ltd For Target Rs.68 By Geojit Financial Services Ltd
Stellar Q2 performance amidst headwinds...
Suzlon energy is a vertically integrated wind turbine manufacturer and O&M service provider with over 20.9GW of installed capacity across the globe.
* Q2FY25 consolidated revenues registered 48% YoY growth as the quarter saw 256 MW of WTG deliveries (94% YoY growth), the highest delivery in the second quarter in the last seven years despite unfavorable climate conditions.
* WTG revenues grew at 72% YoY to stand at Rs.1,507cr. While OMS segment revenues stood at Rs.565.5cr (up 18% YoY), foundry and forging division revenues declined 33% YoY, while intersegment sales increased marginally at 1% to stand at Rs.65.6cr.
* EBITDA stood at Rs.294cr, registering 31% YoY growth; however, the margins declined by 185bps in the quarter and 82bps in H1FY25 as the company incurred technological investments and ramped up capacity for future deliveries. Non-cash provisions of about 32 crores on account of ESOPs granted to employees pushed employee costs higher.
* Q2FY25 PBT grew 97% YoY to Rs.202cr. Adjusted PAT stood at Rs.201cr., registering 46%YoY growth. The balance sheet continues to remain healthy post Renom consolidation with net cash at Rs.1,277cr
Outlook & Valuation
We forecast WTG deliveries growth at 67% CAGR in FY24-27E, based on the management’s stated expectations for wind installations in India. ( 5/7/10 GW for FY25E/26E/27E). Considering execution risks (land acquisition and transmission infrastructure deficiencies), we expect FY24-27E EPS growth at 61% CAGR. With the ROE expected to expand to 25% by FY27E, we believe Suzlon’s story is only developing. Recent order wins indicate preference for the turbine manufacturer among state, PSU, and C&I clients, and recent acquisition of Renom Energy can enable tapping into over 32GW of non -Suzlon O&M opportunities. Recent correction places the stock at attractive valuations. We value at 45X on Sept.2027 EPS of Rs.1.5, setting a target of Rs. 68, and maintain our BUY rating
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