The initiation comes with a “buy” recommendation and a price target of ₹70 per share, which implies a potential upside of 21% from Monday’s closing levels.
Motilal Oswal believes that wind energy is likely to account for nearly 20% of India’s renewable energy mix, compared to 39% in the US and Germany, 33% in China and 42% in the UK, highlighting the need for more focus on wind energy development.
“India’s relatively lower wind energy penetration offers significant room for growth,” Motilal Oswal rote in its note.
Suzlon has projected India’s wind energy installations to reach nearly 4 GW in the current financial year, 6 GW in financial year 2026 and 7-8 GW annually from financial year 2027 onwards.
The company has over 15 GW in installed capacity, which is higher than its competitors like Siemens Gamesa (8.9 GW), Vestas (3.4 GW) and INOX (3.1 GW). “Suzlon’s strong leadership in the Operations & Maintenance (O&M) segment, further strengthens its competitive edge,” Motilal Oswal’s note said, adding that the acquisition of Renom Energy Services strengthens its capabilities further.
Although competition is rising in India’s wind equipment market, Motilal Oswal believes that the pie is big enough even for more participants. Assuming an 8 GW wind installation in financial year 2027 in India, Suzlon’s order book execution is likely to be 3.2 GW that year, according to Motilal Oswal.
The brokerage also expects gross margins for Suzlon’s wind turbine generation segment to increase from 19.5% in financial year 2024 to 22% in financial year 2027, aided by economies of scale. Suzlon’s revenue, Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and adjusted Profit After Tax to grow at a Compounded Annual Growth Rate (CAGR) of 51%, 52% and 63% respectively over financial year 2024-2027, Motilal Oswal projected.
Suzlon is unlikely to have any tax liability until the first half of financial year 2027, which will enable them to conserve cash flows. That net cash position is likely to rise further by that period, given the limited capex needs for the near-term. Order book execution will also lead to a rise in operating cash flow, Motilal Oswal said.
Rising competition from Chinese and European players as wind installations pick up, potential pressure on realisations and margins for wind turbine generators, technological changes leading to products becoming obsolete, delays in project execution, volatility in raw material prices, operational and overhead costs are some of the key risks highlighted by Motilal Oswal in its note for Suzlon Energy.
Motilal Oswal is now the seventh analyst among eight who have a “buy” recommendation on Suzlon Energy. The other one has a “hold” rating. Consensus projects a potential upside of 20% from current levels.
Shares of Suzlon Energy ended 2.5% higher on Monday at ₹57.9. The stock is up 6% in the last one month, but is still down 33% from its recent highs of ₹86.
