Suzlon Energy shares at Rs 30? JM Financial sees 37% upside on stock by September 2024

JM Financial has initiated coverage on Suzlon Energy Ltd with a 'Buy' rating and a September 2024 target of Rs 30 per shares, based on a 25 times September 2025 earnings per share (EPS), citing industry tailwinds, a deleveraged balance sheet and a robust order book. It sees a strong pick-up in the company’s performance going forward.

The share price target on Suzlon Energy suggests a 37 per cent potential upside for the renewable energy solution provider over its Friday's intraday price of Rs 21.94 apiece

Moving past the painful period, Suzlon Energy continues to have a 30-35 per cent market share in the domestic market driven by technology superiority and reliable O&M services, JM Financial said adding that the growing order book with a better-margin product-mix gives revenue visibility over the next 2 years.

"We expect Suzlon to exceed 2.5-3GW of annual installations in the near to mid-term as the company is best placed to benefit from industry tailwinds," the domestic brokerage said.

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JM Financial said the discontinuation of reverse auction, better demand visibility with bidding trajectory, upcoming repowering policy, open access policy, waiver of ISTS charges, introduction of wind specific RPOs and finally improvement in technology (resulting in higher productivity) have revived the momentum in the wind sector. JM Financial said it sees the current market size of 5-6GW per annum of wind opportunity growing to 11-12GW per annum by FY27.

Suzlon Emergy had to undergo restructuring exercise on account of unfulfilment of its debt obligations in the past. However, it has refinanced its existing debt and converted its entire outstanding optionally convertible debentures (OCDs) and compulsorily Cconvertible preferencesShares (CCPS) during last one year to bring down the total debt.

"Suzlon Energy has completed rights issue of Rs 1,200 crore and utilised Rs 900 crore to prepay its o/s debt obligations. It recently completed a Rs 2,000 crore QIP in August, the proceeds of which will be utilised towards repayment of debt (Rs 1500 crore) and fulfilling capex requirement. With reduction in debt, lower interest cost and better financial risk profile, the performance of the company is poised for significant improvement," it said.

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