Shares of Suzlon Energy experienced a significant uptick of over 5% on Tuesday, hitting the upper circuit limit and closing at Rs 62.22. While this increase is a positive development for investors, the stock remains approximately 30% below its 52-week high of Rs 86.04. This dip may raise concerns among some investors, but there are several compelling reasons why this should not be a cause for worry and may even present an attractive opportunity for those looking to buy into the company for long-term growth.
Suzlon Energy’s financial results for the second quarter of FY25 paint a promising picture of the company’s performance. The company saw a robust 48% year-on-year (YoY) increase in consolidated revenues, which was largely driven by a significant surge in the delivery of wind turbine generators (WTGs). Suzlon delivered 256 MW of WTGs during the quarter, reflecting a 94% YoY growth. This delivery volume marked the highest second-quarter performance in seven years, despite facing challenging weather conditions. The increase in revenues from WTG deliveries, which surged by 72% YoY to Rs 1,507 crore, was a key contributor to this growth. Furthermore, the Operations and Maintenance Services (OMS) segment also showed strong results, with an 18% YoY increase in revenues, reaching Rs 565.5 crore. The company’s profit after tax (PAT) for the period stood at Rs 201 crore, marking a 46% YoY increase, and its earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose by 31% YoY to reach Rs 294 crore.
Suzlon’s balance sheet remains strong, with a healthy net cash position of Rs 1,277 crore following the consolidation of Renom Energy, the company’s service business arm. This strong financial position gives Suzlon the flexibility to continue expanding its operations and pursue future growth opportunities without undue concern about its financial stability. Investors can take comfort in knowing that the company has a solid foundation to support its ongoing business expansion, even as it continues to navigate the challenges of the renewable energy market.
Despite the recent dip in stock price, experts are generally bullish on Suzlon’s long-term outlook. Several factors contribute to this positive view. According to a report from Geojit Financial Services Ltd, the company’s stock is valued at Rs 68, based on expectations of significant growth in Suzlon’s wind turbine deliveries. Suzlon is expected to grow its deliveries at a compound annual growth rate (CAGR) of 67% between FY24 and FY27, driven by the increasing wind installations in India, which continues to be one of the world’s largest and most promising markets for renewable energy. Suzlon’s earnings per share (EPS) is also projected to grow at a CAGR of 61% over the same period, and the company’s return on equity (ROE) is forecast to expand to 25% by FY27, further adding to the stock’s long-term appeal.
The company’s management remains confident about its future prospects. CEO JP Chalasani emphasized the strong demand in the commercial and industrial (C&I) sector, which currently makes up 54% of Suzlon’s order book, which stands at an impressive 5.1 GW. Suzlon is in a strong position to capitalize on the projected growth in India’s renewable energy sector, with an ICRA report forecasting that India will require approximately 78 GW of wind and solar energy by 2027. Suzlon’s strong market position and extensive order book suggest that the company will remain a key player in this space, with demand expected to remain robust in the years to come.
Another positive development for Suzlon is its debt-free status, having successfully reduced its liabilities and currently holding Rs 1,200 crore in cash on its balance sheet. This financial milestone provides the company with a solid cash flow, and Suzlon has no immediate plans to borrow further. The company’s service business, which generates Rs 750 crore in annual EBITDA, provides a steady income stream, supporting the company’s expansion efforts and future growth initiatives. With no need for additional borrowing and a stable cash position, Suzlon is in an enviable position relative to many of its peers.
Beyond wind energy, Suzlon is also pursuing diversification into other sectors. The company plans to expand into manufacturing castings and forgings for industries such as defense, railways, and oil and gas. Although the qualification processes for these sectors can be lengthy, Suzlon is already working to meet the necessary requirements, with the expectation that it will begin receiving orders from these new sectors by the end of next year. This diversification strategy could provide Suzlon with additional revenue streams and reduce its reliance on the wind energy market, further bolstering its long-term growth prospects.
Overall, while Suzlon’s stock has experienced a dip from its 52-week high, the company’s solid financial performance, robust order book, healthy balance sheet, and diversification efforts suggest that the company is well-positioned for future growth. The current market dip could be viewed as a potential buying opportunity, offering an attractive valuation for long-term investors. Given the company’s optimistic outlook, strong growth trajectory, and the potential of India’s expanding renewable energy market, Suzlon is likely to remain a key player in the sector, and its stock could offer significant upside in the years ahead.
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