As the generation mix shifts towards renewables, particularly solar, bringing diversity into the supply mix by enhancing the share of wind is imperative. This will help in partly addressing grid challenges, along with cost advantages and support for domestic manufacturing.
This article explores India’s expanding wind energy sector, focusing on Suzlon Energy’s position and growth potential. It examines the company’s financial performance, order book, and expansion plans against the backdrop of India’s ambitious renewable energy targets. The report also evaluates Suzlon’s competitive advantages, market trends, and challenges to provide a comprehensive outlook on the company’s role in India’s sustainable energy future.
Industry Overview
India’s wind energy sector is propelling the country towards a sustainable future. As the world’s third-largest electricity producer and consumer, India’s growing population and increasing per-capita energy consumption drive demand for clean power. Wind energy and solar and hybrid solutions are crucial to reducing dependence on imported fossil fuels.
With the potential for high plant load factors and integration with energy storage, wind-solar hybrid projects offer a reliable, round-the-clock renewable energy source.
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India’s wind energy sector is showing strong growth, with the country ranking 4th globally in total wind installations. The industry commissioned 770 MW in the quarter, which fell below expectations.
Estimates suggest India could achieve 5 GW of wind installations in FY’25. Many turbines are in the pre-commissioning phase, expected to be operational in Q2 FY’25. The sector’s expansion presents significant opportunities for established players in the market.
Company Overview Of Suzlon Energy
Suzlon Energy, founded in 1995, stands as a leading global wind energy company headquartered in India. With over 16,000 employees across 25 countries, Suzlon has installed more than 20.8 GW of wind energy worldwide.
The company manufactures wind turbines ranging from 600 kW to 2.1 MW capacity and holds a 10% global market share. Suzlon dominates the Indian market with 111+ wind farms and an installed capacity exceeding 14,820 MW. The company pioneered the ‘Concept to Commissioning’ model in wind energy and has expanded into solar power, offering Wind-Solar hybrid solutions.
Suzlon’s installations reduce over 53.37 million tonnes of CO2 emissions annually, contributing significantly to sustainable energy development. Suzlon’s operations and maintenance business now oversees 14.8 GW of capacity in India, maintaining over 96% machine availability.
Order Book Value
Suzlon Energy reported a robust orderbook of 3.8 GW as of June 2024, which management described as the largest ever in the company’s history. This strong order book is attributed to the superior technology of their S144 WTG model and increased customer confidence.
The company’s deliveries in Q1 FY25 reached 274 MW, doubling from 135 MW in Q1 FY24, indicating significant growth. The order book composition has shifted, with about two-thirds now coming from the commercial & industrial (C&I) sector and one-third from power purchase agreements (PPAs).
Management expects most of the current 3.8 GW order book to be executed between FY25 and FY26, with some extending into early FY27. The company is selective in taking orders, focusing on those with confirmed offtake and definitive timelines. Suzlon’s manufacturing capacity is between 3.5 and 4 GW annually, with plans for expansion in FY26, suggesting continued order book growth expectations.
Changes In Investor sentiment
Investor sentiment for the company shows notable trends from March to Jun 2024. Promoter holdings remained stable at around 13.27%. Foreign Institutional Investors (FIIs) demonstrated increasing interest, with their stake rising from 19.57% to 21.53%. Domestic institutional investors (DIIs) also increased their holdings from 6.30% to 9.17%.
Public shareholding saw decline from 60.85% to 56.03%. The growing FII stake suggests rising international confidence, while the slight reduction in public holdings might indicate a shift towards institutional ownership.
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Financial Highlights Of Suzlon Energy
Revenue: Suzlon Energy has witnessed a remarkable turnaround in its topline. Revenue has surged from ₹2,973 crores to over ₹6,529 crores, 2X from 2020 to 2024. This growth trajectory is primarily driven by a robust order book and the government’s unwavering commitment to renewable energy.
Net Profit: Equally impressive is Suzlon’s transformation from a loss-making entity to a profitable one. The company has successfully converted losses of over ₹2,692 crores in FY20 into a net profit of ₹660 crores in FY24.
Return on Asset (ROA): A testament to Suzlon’s improved efficiency is the ROA. The company has impressively reversed its fortunes from a negative ROA of -40.46% to a healthy 11.2%, indicating better efficient use of its assets.
Debt Reduction: Suzlon’s financial health has been significantly reinforced by its aggressive debt reduction strategy. The company has managed to slash its debt from a staggering ₹9685 crores to a mere ₹110 crores, significantly strengthening its balance sheet and enhancing its competitive position.
Target Prices
ICICI Securities: maintains a “BUY” rating with a target price of Rs 60, highlighting Suzlon’s positive operational performance and commitment to enhancing corporate governance practices. However, they express concerns about the company’s corporate governance.
Anand Rathi reports that Suzlon Energy shows promising growth potential in India’s expanding wind energy sector. The company plans to increase production capacity at its Daman plant and potentially reopen its Pondicherry facility to meet rising demand. With a strong order book and expected delivery growth, Anand Rathi maintains a “BUY” rating with a target price of Rs58, based on impressive growth opportunities in the wind turbine market.
Geojit Financial Services gave Suzlon Energy a ”BUY” rating with a target price of Rs73. This is due to India’s ambitious wind energy targets, the company’s strong order book, and expected sales growth outpacing industry averages. Suzlon’s vertically integrated business model, coupled with its high-margin O&M segment, positions it well to capitalise on the projected wind energy sector expansion.
What lies ahead for Suzlon
- Discontinuation of the reverse auction, better demand visibility with bidding trajectory, repowering policy, open access policy, waiver of ISTS charges, the introduction of wind-specific RPOs, and finally improvement in technology resulting in higher productivity have revived the momentum in the wind sector.
- The company’s management expects India’s wind energy sector to expand significantly. Installations projected to reach 5-5.5 GW in FY25 and potentially 6.5-7 GW in FY26.
- Suzlons aims to maintain or potentially increase its market share, which has historically been around 30%.
- The company has a robust order book of 3.8 GW, mostly to be executed over the next two years.
- Suzlon is also expanding its manufacturing capacity from the current 3.5-4 GW per year.
- The management is focusing on quality orders with better margins and timely execution. While facing some execution challenges common to the sector, Suzlon is optimistic about overcoming these hurdles.
- The company’s financial performance has improved significantly. With strong revenue growth and profitability, setting the stage for continued success in the future.
- Suzlon’s future looks promising, with wind capacity installations expected to reach 8-9GW by FY27.
- Expanding production capacity at its Daman plant will help meet rising demand.
- Restarting the Pondicherry facility in phases could further boost output to over 4.5 GW annually.
- Analysts project deliveries of 1.5GW and 2GW for FY25 and FY26, respectively.
Key Metrics Of Suzlon Energy
Conclusion
Driven by government initiatives and ambitious targets for renewable energy, Suzlon Energy is well-positioned to experience significant development in India’s wind energy sector. With a robust 3.8 GW order book, plans to increase production capacity, and strong financial performance, Suzlon is well-positioned to capitalize on projected industry growth.
The company’s focus on quality orders, improved technology, and high-margin O&M segments contributes to its promising outlook in shaping India’s sustainable energy future.
In your opinion, what are the potential hurdles Suzlon Energy faces as it expands into India’s growing wind energy market? How will the business overcome these obstacles to keep up its advantage over competitors and continue on its current growth trajectory?
Written By Fazal Ul Vahab
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