Suzlon share price rises as mutibagger Chinese, German peers tumble; stock plays catch-up

Suzlon Energy Ltd shares may have lagged their global peers over the past year, but the stock appears to be catching up. The domestic wind turbine maker has gained 16.03 per cent over the past three months, helping narrow its one-year loss to 19.28 per cent.

In contrast, most global peers, including Danish manufacturer Vestas Wind Systems Ltd, Chinese players Goldwind Science and Ming Yang Smart Energy, and German wind turbine maker Nordex SE, have declined up to 37 per cent over the past three months, Bloomberg data compiled by Business Today suggests. 

Ming Yang has been the worst hit, falling 37 per cent during the period. Multibagger Nordex SE, which is still up 113 per cent over the past year, has slipped 12 per cent in the past three months. Goldwind Science is down 16 per cent over the same period but still boasts a one-year return of 103 per cent. Vestas Wind Systems has fallen 9 per cent in the past three months, though it remains up 70 per cent over the past year. Suzlon's domestic peer, Inox Wind Ltd, has declined 7 per cent in the past three months and is down 53 per cent over the past year.

In comparison, Suzlon has delivered a negative return of 12 per cent over the past one year.

Read more: Suzlon Energy, Inox Wind: Share price targets, Q1 results preview

Focused markets

According to Bloomberg data, 97 per cent of Suzlon's earnings come from India. This contrasts with peers such as Vestas, which derives more than half of its revenue from Europe, the Middle East and Africa (EMEA), 36 per cent from the Americas and 11 per cent from Asia-Pacific. Goldwind generates 75 per cent of its revenue from China, with the remainder coming from overseas markets. Ming Yang derives 96-97 per cent of its revenue from China.

Valuations

At Rs 53.30 apiece, Suzlon Energy trades at 29.74 times its trailing 12-month earnings, a valuation that is higher than or comparable to most of its global peers, according to Bloomberg data. Danish manufacturer Vestas trades at 23.09 times earnings, Beijing-headquartered Goldwind Science at 27.69 times and Germany's Nordex SE at 28.75 times. Ming Yang Smart Energy commands a price-to-earnings multiple of 49.12 times.

Suzlon commands a market capitalisation of $7.63 billion, according to Bloomberg data. Its peers commanded m-cap in the $3.45-27.13 billion range. Larger peers Siemens Energy AG and General Electric, whcih command m-caps of $150 billion and $374 billion were excluded from comparison. 

Can Suzlon maintain its lead?

Analysts expect wind turbine makers, including Suzlon and its global peers, to deliver returns of 12-85 per cent over the next 12 months.

Based on estimates from 12 analysts, Suzlon's average target price stands at Rs 66.25 per share, implying a potential upside of 24.48 per cent over the next year. Goldwind is expected to deliver a return of 30.47 per cent based on estimates from 25 analysts, while Nordex has an implied upside of 21.24 per cent based on 19 analyst estimates. Ming Yang offers the highest potential return at 85 per cent based on 18 estimates, while Vestas is expected to deliver a return of 12.63 per cent.