Suzlon Energy gets 'Buy' from MOFSL; here's peer comparison with Inox Wind, Gamesa, Vestas

Suzlon Energy Ltd, which has seen a flurry of 'Buy' recommendations of late, received another such call today, as MOFSL initiated coverage on the stock with a target price of Rs 70 apiece. This target suggests 21 per cent upside potential over the prevailing price.

Calling Suzlon Energy global leader in wind energy with an installed capacity of 20.9 GW across 17 countries, MOFSL mentioned that it is India's top wind energy service provider with the highest installed capacity of 15GW, operating with a vertically integrated structure. It towers over competitors like Siemens Gamesa (8.9GW), Vestas (3.4GW), and Inox Wind (3.1GW) in terms of installed capacity.

MOFSL noted that competitors are investing in the Indian wind equipment market. This includes Envision Energy India's 1GW partnership with Juniper Green Energy; SANY India's 1.6GW contracts with JSW Group (1.3GW); and Sembcorp (0.3GW). Western players like GE, Gamesa and Vestas, despite their EPC capabilities, are avoiding the EPC segment due to low margins, while Chinese manufacturers are inactive in India’s EPC market.

"This creates a favorable environment for domestic manufacturers, particularly Suzlon Energy, to capitalise on the growing demand in the Indian wind energy sector due to its presence across the value chain. Assuming 8GW wind installation in India (in FY27), we estimate Suzlon's order book execution to be 3.2GW in FY27," MOFSL said.

Assuming that Inox Wind contributes an estimated 2GW in FY27, this still leaves an additional 2.8GW for other players, demonstrating the scale of opportunities in the sector, the brokerage added.

"We arrive at a target price of Rs 70 by applying a target PE of 34 times to December 2026E EPS. This is at a slight premium to historical average 2-year forward PE of 27 times given execution and earnings are just picking up for Suzlon Energy. While valuations across the capital goods space have come off, they remain elevated given a healthy earnings growth trajectory, a decent order book, improving cash flows, and a positive industry outlook," MOFSL said.

Geojit Financial Services values the stock at a 40 times on FY27 EPS to arrive at a target price of Rs 71. JM Financial suggested 'Buy' rating on the stock with a target price of Rs 71.

Morgan Stanley maintained its 'overweight' on Suzlon with a target price of Rs 71 per share, while Nuvama Institutional Equities upgraded Suzlon to 'buy' from 'hold' with a target price of Rs 60 on the stock.

MOFSL said Suzlon is reasonably priced, given an estimated EPS CAGR of 63 per cent over FY24-27, significantly surpassing domestic capital goods peers ABB India (23 per cent), Siemens (20 per cent), Thermax (17 per cent), and CG Power (26 per cent) and global peers such as SANY (26 per cent).

On PEG ratio, Suzlon Energy is seen favorably trading at FY26E PEG ratio of 0.6 times, below other domestic capital goods peers such as Thermax (2.5 times), ABB India (6 times), and CG Power (1.9 times).

MOFSL forecast a consolidated Ebitda margin of 14-16 per cent for Suzlon Energy for FY25-FY27. Sulzon ENergy, it said is also well-positioned to benefit from its significant tax shield arising from unabsorbed depreciation and brought-forward losses.

"A majority of these losses are set to expire between FY25 and FY32. We estimate Suzlon Energy not to have any tax liability until 1HFY27, enabling the company to conserve cash flows," it said.