Suzlon Shares At 13-Year High: Why Analysts Are Cautiously Optimistic

Suzlon‘s share price has been on a dream run. The stock has surged up over 400% in the past year and is still going strong at the bourses. Analysts at ICICI Securities are cautiously optimistic about the stock.

The Suzlon Analyst: Mohit Kumar-led analyst team at ICICI Securities maintained the “add” rating for the stock raising the target price to ₹48 from ₹36.

The Suzlon Thesis: The analysts said that Suzlon has made significant strides in its financial turnaround recently, highlighted by its successful efforts to raise capital and retire debt. This turnaround is evident in its Q3FY24 results, with revenue growing 7% year-on-year to ₹1,550 crore, EBITDA increasing by 15% year-on-year to ₹250 crore, and PAT soaring 2.6 times year-on-year to ₹200 crore, the brokerage added.

The analysts also highlighted Suzlon’s strong order book. Suzlon has announced substantial order inflows totalling 2.9 gigawatts in the first 10 months of FY24, compared to just 370 megawatts in FY23. As a result, the order book as of January 2024 stands at 3.2 gigawatts, providing strong visibility for execution growth in the medium term and enhancing the profitability of the wind turbine generator (WTG) segment.

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The brokerage also noted that as of December 2023, the company has become net cash positive with a cash reserve of ₹700 crore. As per the analysts, the medium- to long-term outlook for the wind industry is positive, with an expected 10GW of wind opportunities to be floated between FY23 and FY27. Additionally, given the increasing complexity of renewable energy (RE) power projects, including hybrid, real-time control (RTC), and flexible dynamic rating enhancement (FDRE), wind energy is poised to play a crucial role in RE generation in the future.

However, the brokerage pointed out that the company’s quality of earnings is a little weak. The analysts highlighted that most of the company’s profits came from the operation & maintainance segment.

Price Action: Suzlon’s share price was locked in 5% upper circuit at ₹50.60 on Friday.

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