Suzlon Energy shares: Why is the stock rising? Price targets suggest most positives priced in

Shares of Suzlon Energy Ltd are hovering at levels last seen in 2011. Brokerages such as ICICI Securities said Suzlon Energy has successfully turned a corner in recent times by raising Rs 20,00 crore through QIP; and retiring debt. A fall in financial cost, analysts said, has enabled Suzlon Energy to post a robust financial turnaround, which was evident in its December quarter results. But Suzlon Energy shares might be factoring in most positives, suggest a couple of price targets.

Suzlon Energy recorded strong order inflows at 2.9GW in FY24 so far and has a robust order backlog of 3.1GW, as of Dec-23, which is five times its trailing 12-month execution of 620 MW.

"The order inflow pipeline still remains strong in the medium term," ICICI Securities said which has maintained 'ADD' with a revised target price of Rs 48 on the stock against Rs 36), valuing the stock at 35 times FY26E EPS of Rs 1.4 per share.

At the time of writing this report, Suzlon Energy shares had hit a decadal high of Rs 50.72, suggesting positives are largely priced in.

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The renewable energy solutions provider reported a 159.11 per cent year-on-year (YoY) surge in net profit at Rs 203.04 crore for the December quarter compared with Rs 78.36 crore in the corresponding quarter last year. ICICI Securities said Suzlon’s entire quarterly profitability was driven by the O&M segment. The WTG segment has a Ebitda break-even level of 600 MW per year, which should start contributing as execution picks up.

JM Financial said the December quarter results were in-line with its estimates and that visibility on business improved. It noted that a total of 15 GW of renewable projects are under bidding, which include 9 GW FDRE (Firm and Dispatchable Renewable Energy) projects that typically has at least 40 per cent wind component. Besides, there are 2.6 GW of pure wind projects under bidding, giving Suzlon Energy a healthy pipeline of opportunities going forward.

"We expect Suzlon to deliver revenue/ EBITDA/ PAT CAGR of 42 per cent/43 per cent/176 per cent over FY23-26E. Given the challenges of land-acquisition in scaling up of project execution, we have maintained our estimates for FY25E/26E in spite of better than expected order book, improvement in financial health, favorable policy environment and very healthy bidding pipeline. We maintain our BUY rating on the stock with a revised target of Rs 54," it said.

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