Suzlon Energy: JM Financial shares target price after 'emphatic assurance' by management

Shares of Suzlon Energy Ltd hit 5 per cent lower circuit in the early session on Monday to Rs 47.35 but the stock made a mild recovery to trade at Rs 47.74 at 12.30 pm, down 4.21 per cent, commanding a total market capitalization of less than Rs 65,000 crore. The stock was hit but resignation of its independent director.
 

Suzlon’s Independent Director Marc Desaedeleer resigned due to concerns regarding communication and transparency within the company's governance. The company insisted that the resignation is not due to any financial or operational discrepancies and promises to work upon the areas of concern. Despite the exit of the director, brokerage firms are positive on the stock.
 

One specific area of concern for him was the communication style within the organization. He felt that board agendas weren't shared early enough, hindering transparency, said JM Financial in his note. "His primary focus in these discussions was on encouraging process improvements and establishing a more transparent work environment, as he felt the current methods hindered efficiency and required procedural revisions," it said.
 

The company assured Marc's decision to step down was not motivated by any financial irregularities or legal violations within the company. Instead, his resignation originated from concerns he raised regarding internal corporate governance procedures.
 

In response, the company is committed to implementing changes that address these issues. These adjustments will consider the perspectives of both the board and external shareholders, said JM Financial. "The company admitted to inadvertent typo errors, like those in the 4QFY24 results disclosure, and assured they won't happen again," it said.
 

Nevertheless, emphatic assurance of maintaining good corporate governance from management during the post-resignation conference call complimented by the favourable macros, improving the pace of execution and still a healthy board composition, said JM Financial, maintaining 'buy' rating with a target price of Rs 54, based on based on a 30 times FY26E EPS.
 

Commenting on the issue, Nuvama Institutional Equities cited Suzlon CEO's clarification on a call that the issues were soft in nature and process-oriented, which would be implemented in due course. Management reiterated that all legal and financial disclosures have been fully complied with, as per regulations.
 

"We, hence, find no reason to stray away from our ‘buy’ thesis on Suzlon, with an unchanged target price at Rs 53 backed by the wind sector’s structural upturn and financial turnaround of the company," Nuvama added.

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