Suzlon Energy Ltd posted robust order inflows of 1.57 GW for the September quarter, taking its order book to all-time high of 5.1 GW, executable over 18–24 months. A 96 per cent year-on-year (YoY) surge in net profit for the quarter by the renewable energy solutions provider, however, fell short of Nuavma's expectations by 30 per cent.
Suzlon Energy's Q2 execution at 254 MW came in lower than the brokerage estimate of 275 MW, impacted by heavy monsoon. Operating margin also stayed depressed at 14 per cent against an estimate of 16 per cent, owing to new costs related to ESOP, SAP implementation, lease of corporate office and other one-offs, leading to a 30 per cent miss on profit after tax, Nuvama said.
"While we stay long-term positive on Suzlon Energy, the stock price is already factoring in the uptick in OI/profits at 45 times FY27E EPS of WTG business. We are tweaking FY25–27E to account for the Renom acquisition and ESOP charges in FY25E and FY26E, yielding a target price of Rs 67 at 35x FY27E WTG + F&F EPS + DCF of O&M; reiterate ‘HOLD’," Nuvama said.
Suzlon Energy's execution miss for the quarter was largely due to periodic business slowdown during monsoon. The management expects 1H volume to contribute to one-third of FY25 execution, implying 1.6GW execution in FY25. Nuvama is baking in 1.4 GW execution for FY25, 2.4 GW for FY26 and 3GW for FY27.
For the quarter Suzlon reported an Ebitda margin came of 14 per cent, impacted by one offs—ESOP costs of Rs 32 crore, adjusting for which, margin would have been 15.5 per cent. It was also impacted by technological investments to ramp up IT infrastructure and costs associated with the Renom acquisition.
"Interest expenses too were optically higher owing to one-off processing charges and lease rental payments pertaining to sale and lease-back of corporate Headquarters, One Earth, of INR40mn/month, which is expected to reduce going forward due to subleasing income from vacant spaces," Nuvama said.
Nuvama expects Suzlon Energy to remain a key beneficiary of rising mix of FDRE/RTC/Hybrid in government tenders. Suzlon, it said, remains a key player in C&I (two–thirds of OB) and benefits from a duopolistic market in EPC capabilities and maintains an overall 30 per cent-plus market share.