Suzlon Energy was the first Indian renewable energy company to be listed on the Indian stock market in 2005. The journey has not been easy for the company, especially after it was hit hard by the financial crisis of 2008. Investing in the stock market is often compared to riding a rollercoaster, with its ups and downs, twists and turns. Few stocks exemplify this metaphor as vividly as Suzlon Energy, making it essential to discuss Suzlon Energy fundamental analysis.
Once a darling of the renewable energy sector, Suzlon has taken its investors on an emotional journey unlike any other. From soaring to an all-time high of ₹459.80 in January 2008 to hitting a low of ₹1.51 in March 2020, the stock has evoked a spectrum of emotions. Recently, the stock has started to rise again, reaching a 52-week high of ₹52.1 on June 4, 2024. This rekindles curiosity about the company’s strong fundamentals and what the future might hold for this renewable energy giant. Buckle up as we delve into Suzlon Energy fundamental analysis.
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About the Company- Suzlon Energy Fundamental Analysis
Suzlon Energy Limited (SEL) is India’s largest provider of renewable energy solutions. It operates in 17 countries across six continents. The company specializes in the design, development, manufacturing, and supply of wind turbine generators (WTGs). Suzlon has a robust presence across the entire wind energy value chain. It offers a comprehensive range of services including design, supply, installation, commissioning, and dedicated life cycle asset management.
Founded on April 10th, 1995, Suzlon Energy started with a modest 3 MW wind farm project in Gujarat. Over the years, the company has expanded significantly. By 2022-23, Suzlon became the first Indian wind energy company to achieve over 20 GW of worldwide wind energy installations. Additionally, in FY23, Suzlon successfully commissioned the first prototype of its new S144 wind turbine model.
In FY22, Suzlon’s revenue was primarily from the sale of wind turbines and other parts, accounting for approximately 73% of its income. The remaining 27% came from operation and maintenance services. Geographically, 94% of Suzlon’s sales were domestic, while international sales comprised 6%. Revenue from Europe was about 1%, from the USA and Canada around 2%, and from other countries roughly 3%.
Stock Overview and SWOT Analysis
Suzlon Energy Strategic Expansion Plans: Upcoming Projects
Suzlon has maintained a 30% market share in the domestic market. This success is driven by its technological superiority and reliable operations and maintenance (O&M) services. The company’s order book expanded significantly, growing from 652 MW in FY23 to 3.3 GW by May 2024.
Recent Contracts
Juniper Green Energy Contract– In May 2024, Suzlon Group secured a 402 MW contract from Juniper Green Energy. This project involves the installation of 3 MW wind turbine generators in the Fatehgarh district of Rajasthan. Source: RenewableWatch.in
Aditya Birla Group Project– Suzlon announced a new order for a 551.25 MW wind power project for the Aditya Birla Group. The project includes installing 175 wind turbine generators with Hybrid Lattice Tubular (HLT) towers. Each turbine has a rated capacity of 3.15 MW. The installation sites are in the Barmer district of Rajasthan and the Bhuj district of Gujarat. Source: Business Today
Evren Company Order– Suzlon also received an order from ABC Cleantech Pvt Ltd, a joint venture between Brookfield and Axis Energy. This order involves supplying 214 wind turbine generators, each with a 3 MW capacity, for a 642 MW wind power project in Andhra Pradesh. Suzlon will utilize its larger-rated 3 MW S144-140m turbines for this project. Source: The Hindu Business Line
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Order Book Status
As of March 31, 2024, Suzlon Energy had an order book of 2,929 MW. By May 24, 2024, the company secured additional orders totaling 402 MW, bringing the cumulative order book to 3.3 GW. A strong order book indicates robust demand and financial stability for the company. It suggests sustained revenue growth potential and investor confidence in the company’s market position.
Essentials & Financials- Suzlon Energy Fundamental Analysis
Market Capitalisation: Suzlon Energy holds the title of a large-cap stock with a market capitalisation of ₹67,468 Crores. This status reflects the company’s significant market presence and investor confidence.
Profitability Ratios: The company maintains robust profitability ratios, with a Return on Capital Employed (ROCE) of 24.7% and a Return on Equity (ROE) of 28.4%. Higher numbers in these figures are desirable as they indicate efficient use of capital and strong shareholder returns.
P/E Ratio: Suzlon’s Price to Earnings (P/E) Ratio stands at 102.74, which is higher than its sector PE ratio of 65.89. This suggests the stock is overvalued and that investors are willing to pay a premium for Suzlon’s earnings. Thus reflecting strong growth potential and financial stability.
Earnings per Share: The company’s earnings per share (EPS) is positive at 0.49 per share (TTM), indicating consistent earnings. However, this consistency has varied over the past three years.
Debt-to-Equity Ratio: Suzlon has a Debt to Equity (D/E) Ratio of 0.03, which is less than 1. This healthy ratio implies that the company’s assets are financed mainly through equity, indicating lower financial risk and strong financial stability.
Suzlon Energy’s strong financial health, robust profitability ratios, and impressive growth trajectory underscore its promising future in the renewable energy sector.
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Shareholding Pattern
As of March 2024, Suzlon Energy’s promoter holding remains steady at 13.29%, with no changes in promoter pledges, indicating stability in the company’s primary ownership.
Foreign Institutional Investors (FII/FPI) have shown increased confidence in Suzlon Energy by raising their stake from 17.83% to 19.57%, marking a significant increase of 1.74%. This uptick reflects a growing interest from international investors in the company’s potential and performance.
Mutual funds have also demonstrated increased interest, boosting their holdings from 1.33% to 1.86%, an improvement of 0.53%. This rise indicates that domestic institutional investors are optimistic about Suzlon Energy’s future prospects.
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| Shareholders | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Jun 2023 | Sep 2023 | Dec 2023 | Mar 2024 |
| Promoters | 19.82% | 19.82% | 19.79% | 17.17% | 15.85% | 14.50% | 14.50% | 13.28% | 13.28% | 13.28% |
| FIIs | 10.06% | 6.25% | 3.63% | 4.22% | 5.52% | 7.64% | 7.79% | 10.88% | 17.83% | 19.57% |
| DIIs | 10.16% | 7.19% | 5.06% | 16.54% | 13.57% | 5.55% | 5.90% | 9.81% | 6.16% | 6.30% |
| Public | 59.95% | 66.74% | 71.52% | 62.07% | 65.06% | 72.30% | 71.78% | 65.99% | 62.74% | 60.85% |
| No. of Shareholders | 10,22,656 | 10,17,090 | 10,01,884 | 11,17,927 | 20,70,709 | 24,42,672 | 24,90,961 | 28,68,152 | 35,12,040 | 43,55,169 |
Institutional investors have collectively increased their holdings from 23.99% to 25.88%, a notable growth of 1.89%.
This broad-based increase across different types of institutional investors underscores a strong and growing confidence in Suzlon Energy’s market position and future growth potential.
Limitations of the company- Suzlon Energy Fundamental Analysis
High P/E Ratio: Suzlon Energy’s Price-to-earnings (P/E) Ratio is higher than the industry average, exceeding 40 and stands at 102.74. This suggests that the stock may be overvalued relative to its peers.
Declining Cash Flow: The company has experienced declining cash flow from operations over the last two years, indicating poor cash generation from its core business activities.
Significant Decline in Net Profit: Suzlon Energy has seen a major fall in its trailing twelve-month (TTM) net profit, which raises concerns about its profitability and financial health.
These limitations should be considered when evaluating Suzlon Energy’s overall potential, as they point to areas of financial and operational risk.
Important Highlights Of the Company’s Past Year Performances
Profit Growth: Suzlon Energy has recorded robust profit growth over the last three years with a compound annual growth rate (CAGR) of 45%. The trailing twelve-month (TTM) profit surged by 320%, showcasing the company’s resilient performance.
Share Price Increase: Suzlon Energy’s share price has experienced significant growth. Over the last three years, the share price is up by 95%. The share price has increased by 256% in the last year alone.
Return on Equity: The company’s Return on Equity (ROE) for the past year stands at a solid 28%, indicating effective utilization of shareholders’ funds and strong profitability.
Sales Growth: Suzlon Energy has demonstrated notable sales growth over the past three years, achieving a compounded sales growth rate of 25%. However, this growth rate has decreased to 9% in the TTM period, reflecting some recent moderation in sales expansion.
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These performance metrics underscore Suzlon Energy’s strong financial health and potential for future growth, despite the recent slowdown in sales growth.
Highlights Of Earnings and Revenue- Annual/Quarterly
Annual Earnings: Suzlon Energy’s annual revenue rose by 9.64% in the last year, reaching ₹6,567.51 Crores. The company’s annual net profit fell by 76.82% over the last year, declining to ₹660.35 Crores.
Stock Price: Over the past year, Suzlon Energy’s stock price surged by 273.78%, significantly outperforming its sector by 135.69%.
Quarterly Earnings: For the latest quarter, the company’s revenue increased by 29.64% year-over-year (YoY) to ₹2,207.43 Crores. Despite the revenue growth, Suzlon’s quarterly net profit fell by 9.21% YoY, amounting to ₹254.12 Crores.
These figures highlight Suzlon Energy’s mixed performance, with strong revenue growth but significant challenges in maintaining profitability.
Analysts’ Views on Suzlon Energy
Sourcing from Business Today, these are the analysts’ views about Suzlon Energy:
Morgan Stanley: Given the company’s improved financial health following deleveraging and lower fixed operating expenses, assigned an overweight rating. Suzlon Energy 2.0 is seen as well-positioned to benefit from India’s energy transition, according to CNBC TV 18.
Nuvama Institutional Equities: Initiated coverage with a positive outlook, recognizing Suzlon as a leader in the wind energy sector. They predict a 20% upside with a target price of ₹53, based on 35 times FY27E EPS for WTG and foundry & forgings businesses.
Anand Rathi Shares and Stock Brokers: Maintained a buy rating following strong March 2024 quarter earnings, suggesting a 30% upside potential. Their 12-month target price is ₹58, based on 35 times FY26E PER. However, they note risks such as adverse government policies and intense competition.
These analysts’ assessments reflect Suzlon Energy’s strong market position and growth potential, despite acknowledging certain risks.
Bottom Line
Summing up Suzlon Energy fundamental analysis, Suzlon Energy exhibits a promising future despite facing turbulence in the past. The company’s strong order book, solid fundamentals, and increasing participation from both domestic and foreign institutional investors highlight its resilient growth. Furthermore, the government’s ambitious targets to make India renewable energy efficient provide an additional boost to the sector, positively impacting Suzlon’s growth prospects. Although the stock’s high volatility might raise concerns about its credibility, it remains a promising stock for long-term investment.
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Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
