Market Leader Stock to Buy Now: Suzlon Energy Poised for 27% Upside—Do You Own It?
Introduction
Suzlon Energy : The Heavy Electrical Equipment sector in India plays a crucial role in the country’s industrial growth, particularly in energy generation and infrastructure development. As of March 2024, India’s installed power generation capacity stands at 298,325 MW, and the sector is expected to grow to USD 76.24 billion by 2028, at a CAGR of 14.3%.
Among the leading companies in the renewable energy space, Suzlon Energy Ltd. stands out as a strong player with impressive growth potential. Recent developments suggest that this stock could provide a significant 27% upside from current levels. Let’s analyze why Suzlon is an attractive investment opportunity.
Suzlon Energy: A Market Leader with Strong Growth Prospects
Stock Price Movement
Suzlon Energy Ltd., with a market capitalization of ₹74,727 crore, is currently trading at ₹55.2 per share. The stock recently saw an increase of 1.17%, reflecting growing investor confidence in its prospects.
Brokerage Recommendation
Leading global brokerage firm Investec has issued a ‘Buy’ rating on Suzlon with a target price of ₹70 per share, indicating a 27% upside from its recent price of ₹55 per share.
Key Growth Drivers
- Wind Energy Revival – India’s renewable energy sector is witnessing significant momentum, and Suzlon is well-positioned to benefit from this revival.
- Robust Order Book – The company has an order book of 5.5 GW, ensuring revenue visibility for the coming years.
- Optimized Supply Chain – With streamlined manufacturing processes and strategic supply chain improvements, Suzlon is set to enhance efficiency and profitability.
- Strong Financials – The company boasts a net-cash status, solid return ratios, and improving profit margins.
Recent Order Wins & Expanding Capacity
Suzlon recently secured a 201.6 MW repeat order from Oyster Renewable Energy, increasing their partnership to 283.5 MW in Madhya Pradesh. This project, expected to be completed in the next nine months, reflects Suzlon’s growing dominance in India’s renewable energy market.
The company has also expanded its manufacturing capacity to over 4.5 GW, with new blade manufacturing facilities in Madhya Pradesh and Rajasthan. These advancements will support its ambitious expansion plans.
Execution & Deliveries
- Suzlon delivered 447 MW in Q3 FY24, a 163% YoY increase from 170 MW.
- It has delivered 977 MW in the first nine months of FY24, surpassing the previous year’s total of 710 MW.
- Despite industry-wide transmission delays and land issues, Suzlon continues to execute projects efficiently.
Operational Highlights
- 80% of Suzlon’s order book consists of non-EPC orders, allowing for better project execution.
- Key customers include NTPC, Jindal Renewables, and Torrent Power, ensuring revenue stability.
- Suzlon’s O&M business manages 15 GW in India, with 96%+ machine availability, ensuring efficient operations.
Suzlon’s Strategic Initiatives for Long-Term Growth
Suzlon is actively working towards Net Zero emissions by 2050 as a member of the UN Global Compact. The company is also:
- Diversifying within the wind energy sector by advancing project development contracts totaling 1,100 MW.
- Exploring export opportunities to strengthen its global footprint and leverage its manufacturing capacity.
With a 31% market share in India, Suzlon continues to be a dominant force in the renewable energy sector. As of 2024, it has a total installed wind energy capacity of 20.8 GW worldwide.
Margin Guidance & Financial Strength
Suzlon expects its consolidated contribution margins to stabilize around 20%, factoring in steel price fluctuations and project execution efficiencies.
- O&M business margins are projected to remain close to 40%, though some quarterly fluctuations are expected.
Key Financial Ratios
| Metric | Value |
|---|---|
| Market Cap | ₹74,727 Cr. |
| Current Price | ₹55.2 |
| 52-Week High / Low | ₹86.0 / ₹35.5 |
| Stock P/E | 63.8 |
| Book Value | ₹3.32 |
| ROCE (Return on Capital Employed) | 24.9% |
| ROE (Return on Equity) | 28.8% |
| Debt to Equity | 0.06 |
| Dividend Yield | 0.00% |
| Pledged Percentage | 0.00% |
| QoQ Profit Growth | 93.3% |
| Quarterly Profit Variation | 90.6% |
| Industry P/E | 48.7 |
| Intrinsic Value | ₹6.28 |
| RSI (Relative Strength Index) | 51.1 |
| Earnings Per Share (EPS) | ₹0.85 |
| 200-Day Moving Average (DMA 200) | ₹58.7 |
| Free Cash Flow (3-Year Avg.) | ₹1,556 Cr. |
| Total Debt | ₹277 Cr. |
Should You Invest in Suzlon Energy?
Suzlon Energy presents a compelling investment case due to its strong market position, robust order book, and improving financials. With a 27% upside potential based on brokerage estimates, long-term investors looking for exposure to India’s renewable energy sector should consider adding Suzlon to their portfolio.
Given its strong execution track record, strategic expansion, and commitment to clean energy, Suzlon Energy remains a top stock to watch in 2024.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.