Suzlon Energy shares slip despite Rs 2K-cr fundraising plan; is the upside capped?

Shares of renewable energy firm Suzlon Energy Ltd fell nearly 4% today despite the board of renewable energy provider announcing last week that it has cleared a proposal to raise up to Rs 2,000 crore. The company will explore various financial routes to raise the amount. The stock slipped 3.85% to Rs 17.20 against the previous close of Rs 17.89 on BSE. Market cap of Suzlon Energy fell to Rs 21,697 crore.   

Turnover and volumes were high for the Suzlon Energy stock with 270.42 lakh shares changing hands amounting to a turnover of Rs 47.43 crore on BSE.   

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In terms of technicals, the relative strength index (RSI) of the stock stands at 73.8, signaling it's trading in the overbought zone. Suzlon Energy shares have a beta of 1.6, indicating very high volatility in a year. Suzlon Energy stock is trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages. 

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"The board approved issuance of number of fully paid-up equity shares and/or convertible bonds (CBs), and/or non-convertible debt instruments and/or any other instruments and/or combination of instruments through one or more private offerings or qualified institutions placement and/or any combination thereof, for an aggregate consideration not exceeding Rs 2,000 crore," said Suzlon Energy in a stock exchange filing. 

The stock hit an intraday high of Rs 18.19 in the last session, almost touching the 52-week high of Rs 18.54 reached on July 4 this year. 

The correction in the stock can be attributed to profit-booking from near 52-week high level. Amid today’s correction, analysts look bullish on the outlook of the stock. 

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Santosh Meena, Head of Research, Swastika Investmart said, “Suzlon has recently shown promising signs as it emerges from a prolonged 15-year bear market. A significant development is the breakout of a long-term downsloping trendline originating from its peak in 2008. Presently, Suzlon is exhibiting an encouraging pattern of higher highs and higher lows, with the formation of an ascending triangle. However, it's important to note that the price range of  Rs 19–20 may pose an immediate supply zone, potentially impacting further upward movement.”  

“In the event of a pullback, it's worth highlighting that the range of Rs 12–10 is expected to act as a robust demand zone, providing substantial support to the stock price,” he added   

Abhijeet from Tips2trades said, "Suzlon Energy looks bullish on the daily charts with next resistance at Rs 19. A daily close below the support of Rs 15.8 could lead to Rs 13.2 in the near term."   

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Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, “The stock has witnessed a decent rise from Rs 13.30 levels to touch the peak zone of Rs 18.45 from where it had slipped down slightly with profit booking seen and currently taking support near Rs 16.65 levels has once again indicated a decent pullback to improve the bias. The bias has once again shown improvement anticipating for further upward move with initial target of Rs 18.70 visible and thereafter, with further strength sustained can carry on the momentum to Rs 20.20 zone.”   

Meanwhile, ICICI Securities initiated coverage on Suzlon Energy with a buy call in June end. It assigned a target price of Rs 22 for the renewable energy stock.   

“We believe Suzlon is best equipped to benefit from industry tailwinds. We expect a sharp uptick in earnings FY24E onwards. Suzlon has reduced leverage by restructuring its debt and by raising money through a rights issue. As a result, leverage is now merely 1x debt/EBITDA. Initiate with BUY and a target price of Rs 22 per share (assigning a multiple of 24x FY25E EPS)," the brokerage said.   

Explaining the rationale behind its stance, it said, "The lowest-cost solution for an optimal decarbonised grid is a mix of wind, solar and battery storage capacities. Wind generates power in monsoon and nights when solar generation is low. Also, we believe higher wind will lead to lower battery storage requirement for a decarbonised grid." 

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"Suzlon has enjoyed a market share of 33%in India’s domestic market (based on total installations)(source: company). It has 20GW of operational wind power capacity globally and is well ahead of its competitors. Note that its existing order book at 1.5GW bodes well for execution through the next two years," added the brokerage.   

Of late, the financial performance of the company has remained stellar.   

Suzlon Energy reported a consolidated net profit of Rs 319.99 crore for the March 2023 quarter led by lower expenses. It posted a consolidated net loss of Rs 205.52 crore in the quarter ended on March 31, 2022. Total income from operations fell to Rs 1,699.96 crore in Q4 from Rs 2,478.73 crore a year ago. Total expenses declined to Rs 1,628.39 crore in the March 2023 quarter from Rs 2,511.70 crore a year ago.   

In the last fiscal, Suzlon Energy posted a consolidated net profit of Rs 2,887.29 crore against a net loss of Rs 176.55 crore in 2021-22. However, total income in the fiscal dipped to Rs 5,990.16 crore from Rs 6,603.97 crore in 2021-22. Revenue slipped to Rs 5946.84 crore in the March 2023 fiscal against Rs 6519.95 crore for the fiscal ended March 2022.  

Suzlon Energy is a provider of renewable energy solutions. The company is a producer of wind turbines. It offers a range of solar energy solutions, such as solar irradiance assessment, land acquisition and approvals, infrastructure and power evacuation, supply chain, installation and commission and life cycle asset management.

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