Renewable energy company Suzlon Energy has given multibagger returns to its investors in the last 1 year as well as in 2023 YTD despite volatility in the overall market environment. The stock has surged over 233 percent in the last 1 year and 145 percent this year so far.
In 2023, the company has given positive returns in 5 of the 8 months so far. It has jumped over 36 percent in August so far, extending gains for the 5th straight month since April. Between April and August, the stock has soared as much as 227 percent.
However, in the first 3 months of the year, the stock was in the red. It shed over 25 percent between January and March 2023.
Earlier today, August 30, 2023, the stock hit its 52-week high of ₹25.89. In today's deals, the stock has hit its 5 percent upper circuit for the fourth consecutive session. This comes even after the company announced that the 285 MW wind power project it had bagged in May 2018 from Avikiran Solar India Private Limited has been downsized by the two parties due to disruption of the global supply chain.
Apart from that, over 9 crore shares of the company, or 1 percent of the total equity worth ₹232 crore exchanged hands in a block deal.
Meanwhile, the stock has advanced 273 percent from its 52-week low of ₹6.60, hit on October 13, 2022.
Suzlon Energy is a renewable energy solutions provider. The company is engaged in the business of manufacturing of wind turbine generators (WTGs) and related components of various capacities. It operates in approximately 17 countries across Asia, Australia, Europe, Africa and the Americas. Its services include operations and maintenance services, leadership, optimisation and digitalisation, value-added services and products, and multi-brand operation and maintenance services.
In the June quarter, Suzlon Energy reported a 95.8 percent year-on-year (YoY) decline in net profit at ₹100.90 crore as against a profit of ₹2,392.87 crore in the same quarter last year. However, one must note that the numbers in the June 2022 quarter were inflated by exceptional items. Excluding exceptional items, Suzlon Energy would have reported a loss of ₹66 crore in the corresponding quarter last year. Meanwhile, on a QoQ basis, the company's net profit was down 64 percent.
Revenue from operations also fell 2 percent YoY to ₹1,347.52 crore for the quarter under review from ₹1,377.58 crore in the same quarter last year. The company further stated that its cumulative orders stood at nearly 1.6 GW. Also, the EBITDA margin for the quarter stood at 15.4 percent.
After a sustained effort to reduce debt in FY23 that resulted in a healthier and sustainable balance sheet for the company, Suzlon Energy said its focus in FY24 remains on funding its operations and fulfilling its commitments to customers and other stakeholders.
Despite the recent rallies, domestic brokerage house JM Financial has initiated coverage on the stock with a target price of ₹30, indicating an upside of 22 percent from the current market price of ₹24.66, as on August 29.
"With industry tailwinds in place, a deleveraged balance sheet and a robust order book, we expect a strong pick-up in the company’s performance going forward," said the brokerage.
As the company is on its way to becoming net-debt free, the brokerage expects Suzlon to deliver revenue and EBITDA CAGR of 31 percent and 38 percent respectively over FY23-26E. It also sees Suzlon’s EPS (earnings per share) reaching ₹1.4 in FY26. The brokerage further believes that as the generation mix is shifting towards renewables particularly in favour of solar, bringing diversity into the supply mix by enhancing share of wind is imperative.
"Moving past the painful period, Suzlon continues to have a 30-35 percent market share in the domestic market driven by technology superiority and reliable O&M services. The growing order book with a better-margin product mix gives revenue visibility over the next 2 years. We expect Suzlon to exceed 2.5-3GW of annual installations in the near to mid-term as the company is best placed to benefit from industry tailwinds," it said.
JM also pointed out that Suzlon had to undergo a restructuring exercise on account of unfulfillment of its debt obligations in the past ( ₹21,700/15,000/2,600 crore in FY15/20/23). However, during the last year, it has refinanced its existing debt and converted its entire outstanding Optionally Convertible Debentures (OCDs) and Compulsorily Convertible Preference Shares (CCPS) to bring down the total debt, it noted.
Further, Suzlon has completed a rights issue of ₹1200 crore and recently completed a ₹2000 crore QIP in Aug’23, the proceeds of which will be utilised towards repayment of debt and fulfilling capex requirements. With the reduction in debt, lower interest cost, and better financial risk profile, the performance of the company is poised for significant improvement, it argued.
Meanwhile, Vinit Bolinjkar, Head of Research - Ventura Securities, is also bullish on the stock.
"The company has enjoyed a market share of 33 percent in India’s domestic market (based on total installations). It has 20GW of operational wind power capacity globally and is well ahead of its competitors. Note that its existing orderbook at 1.5 GW bodes well for execution through the next 2 years. Suzlon has reduced leverage by restructuring its debt and by raising money through a rights issue. As a result, leverage is now merely 1x debt/EBITDA. (Vs 10x in FY22)," he explained.
Similarly, Suman Bannerjee, CIO, Hedonova, also likes the growth potential of the firm.
"Suzlon Energy seems to have shown significant growth and interest in its shares. The stock has reached a nearly six-year high and has performed well in the last one month and one year, gaining 44.67 percent and 191.74 percent, respectively. Suzlon's efforts to reduce leverage and the potential for a mix of wind, solar, and battery storage capacities in a decarbonised grid are some positive factors that can make it a good pick for the long term," it said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.