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1QFY26 in line; outlook upbeat

• Overall a good result, which re-affirms our positive view: Suzlon Energy’s (SUEL) 1QFY26 earnings were aligned with our expectations, with deliveries, revenue, and EBITDA coming in line with our estimates. The miss at the adj PAT level was due to a deferred tax charge of INR1.34b. A strong 1QFY26 earnings performance, coupled with improving new order inflows (according to media reports, SUEL has signed a 700MW deal with TPWR, see link), supports confidence in the company’s guidance of a 60% YoY improvement in deliveries, revenue, and EBITDA.
• What did we like about the result: 1) strong execution at 444MW (our est: 452MW; up 62% YoY), 2) EPC share inched up to 22% of the order book, highlighting improved delivery control and visibility alongside a growing order book, 3) steady per MW realizations in the WTG segment, which we believe could improve further following the local content implementation, and 4) overall healthy EBITDA margins (19% in 1QFY26; our FY26E: 17%).
• Key near-term monitorables: 1) the announcement of Group CFO Mr Himanshu Mody’s departure could be a slight short-term negative, given his instrumental role in the company’s balance sheet turnaround, 2) installations have trailed deliveries in recent quarters, raising concerns about potential disruptions in delivery flow in upcoming quarters, and 3) new order inflow in FY26TD at 1GW has been somewhat tepid.
• Key catalysts/upside risks to our view: 1) while the CFO’s departure is a short-term negative, we do not believe it will derail the company’s strong business momentum, which continues to be supported by positive regulatory tailwinds, 2) we see upside risks to our new order/EBITDA margin estimates as local content is introduced in the coming quarters, 3) despite a tepid FY26TD new order inflow, SUEL might be close to signing a 700MW (INR60b) deal with Tata Power, according to media reports, 4) deliveries have picked up in 2QFY26, with management highlighting that an additional 547MW is in the pre-commissioning stage, and 5) potential efficiencies, such as a reduction in the working capital cycle from 90 to 75 days, are not built into our estimates.
• Changes to earnings; Reiterate BUY: We cut our FY26 adj. PAT estimate by 25% as we build in an effective tax rate of 25% (deferred tax and non-cash). We also marginally adjust the FY27 tax rate higher to 12%. We arrive at our TP of INR80 by applying a target P/E of 35x to FY27E EPS. This is at a slight premium to its historical average two-year fwd P/E of 27x, given that SUEL’s execution and earnings are only now beginning to pick up. Reiterate BUY; our TP implies a 26% upside potential.

Performance in line; strong WTG deliveries drive growth

Financial Performance: 

• SUEL’s consolidated revenue was in line with our estimates at INR31b (+55% YoY, -17% QoQ), with WTG deliveries coming in at 444MW (in line with our estimate of 452MW).
• EBITDA came in line with our estimate at INR6b (+62% YoY, -14% QoQ), with EBITDA margins at 19%.
• APAT was INR3.2b, 32% below our estimates due to higher-than-expected interest expenses and a deferred tax charge of INR1.34b recorded during the period.
• 1QFY26 WTG revenue grew ~67% YoY to INR24.9b, EBIT surged 174% YoY to INR3.4b, and EBIT margin expanded 532bp to 14%.
• WTG’s contribution margin came in higher at 26%, primarily driven by the execution of orders with higher average selling prices during the quarter and lower project activity due to the early onset of the monsoon. Additionally, effective cost control measures helped maintain COGS.

Operational Performance:

• The WTG order book stood at 5,742MW as of Aug’25 (22% EPC and 78% NonEPC).
• The segment mix comprised 54% C&I/Captive, 25% Auctions, and 21% PSU orders.
• WTG deliveries reached 444 MW in 1QFY26, compared to 274 MW during the same period last year (+62% YoY).
• A total of 117MW of WTGs were installed during the quarter, with an additional 547MW erected and currently in the pre-commissioning phase, bringing the overall tally to over 664MW.
• Renom’s AUM stood at 3.2GW as of 1QFY26.
• Net worth stands at INR65.4b.

Highlights of 1QFY26 performance

• WTG deliveries in 1QFY26 stood at 444 MW, with the order book at 5,742MW as of Aug’25. The mix comprised 54% C&I/Captive, 25% auction-based, and 21% PSU orders. The 5.7 GW order book is sufficient to cover deliveries for FY26- FY27.
• A total of 117MW of WTGs were installed during the quarter, with an additional 547MW erected and currently in the pre-commissioning phase, bringing the overall tally to over 664MW.
• The company has maintained its FY26 guidance of 60% YoY growth across key metrics.
• CFO Himanshu Mody will resign effective Aug 31st, 2025; succession planning is in advanced stages.
• The company holds a strong balance sheet with a net worth of INR65b and net cash of INR16b.
• FY26’s interest costs are estimated at INR2b; 1Q costs remained elevated due to a one-off processing fee of INR140m.
• FY26’s tax rate is projected at ~25% (no cash outflow); tax (cash) outflows are expected to begin in FY27.
• The company targets to reduce net working capital days from 90-100 to 75.
• India’s wind installations are projected at 6 GW in FY26, 7-7.5 GW in FY27, and 8-9 GW in FY28.
• Adequate domestic capacity exists for gearboxes, generators, and other components.
• SE Forge recorded sustained growth; ALMM implementation is expected to drive further demand.

Valuation and view

• We arrive at our TP of INR80 by applying a target P/E of 35x to FY27E EPS. This is at a slight premium to its historical average two-year fwd P/E of 27x, given SUEL’s execution and earnings are only now beginning to pick up.

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