Suzlon advances 2% as JM Financial backs FY31 growth plans, sees 17% upside

The brokerage said Suzlon is recalibrating its strategy from product sales to project sales and, eventually, to becoming a solutions provider

Shares of Suzlon Energy traded higher on Thursday after brokerage JM Financial reiterated its 'Buy' rating on the stock, citing the company's FY31 roadmap that targets 10 GW of annual renewable energy (RE) sales, a 15 GW order book and assets under management (AUM) of 70 GW. 

JM Financial believes Suzlon is seeking to follow the evolution path adopted by industrial OEMs such as Goldwind and Vestas, progressing from an equipment supplier (moderate revenue, high margin) to EPC (high revenue, low margin), then to a turnkey solutions provider (very high revenue, medium margin), and finally to a solutions provider (recurring revenue, high margin). 

 

"Although we appreciate the move to address upcoming growth challenges (Tailwinds to soon become winds), we would revise our estimates once green shoots take root," the brokerage said in its report. 

Amid this, Suzlon Energy shares rose 2.48 per cent to ₹55.75 apiece during intra-day trade on Thursday. At 10:31 AM, the stock was trading at ₹55.40, up 1.84 per cent from its previous close. 

JM Financial has set a target price of ₹65 on the stock, based on 25x FY28E earnings per share (EPS). The target price implies an upside potential of 16.59 per cent from the current market price.  READ LATEST STOCK MARKET UPDATES TODAY LIVE

Wind business to remain key growth driver

JM Financial noted that Suzlon plans to maintain around 40 per cent market share in India, compared with 30–35 per cent currently. The company is targeting 3 GW of export orders during FY27–31, supported by high-capacity wind turbines, including the S175 (5 MW) and S163 (6.3 MW). 

The brokerage highlighted that the combined worldwide market share of Suzlon and its subsidiaries stood at around 10 per cent in 2009, making it the world's third-largest wind turbine generator player at the time. 

According to JM Financial, the target of 10 GW RE sales by FY31 assumes 6 GW of wind capacity, based on a 12–15 GW annual India market and a 40 per cent market share, along with 4 GW of solar and battery energy storage system (BESS) capacity. 

The brokerage added that wind power, available during evening hours, has received fresh impetus from industry and policymakers amid peak power shortages.

Product sales to project sales

Suzlon plans to pursue the Development Company (DevCo) model through an integrated co-development platform offering end-to-end capabilities across land acquisition, grid connectivity, approvals and project execution, said JM Financial. 

The company has revived an earlier signed project implementation contract under the DevCo model for the execution of 2.1 GW of wind projects in Andhra Pradesh. The state government has provided connectivity for the entire 2.1 GW project and power purchase agreement (PPA) assurance for 775 MW of firm and dispatchable renewable energy (FDRE).  READ | BlueStone Jewellery stock gains 6% as JM Financial reiterates 'Buy', sees over 20% upside 

JM Financial said this was a key competitive advantage for the company during the previous cycle. 

Suzlon is also scaling up its EPC platform, which currently accounts for 28 per cent of orders, to deliver integrated wind, solar and BESS projects aimed at addressing execution challenges faced by developers. The company plans to establish a BESS manufacturing facility by 2027.

Asset management business in focus

Suzlon aims to increase its AUM more than four-fold to 70 GW by FY31 from 15.7 GW currently, creating a large annuity business across wind, solar, hybrid and multi-brand portfolios. 

JM Financial believes the current AUM of 15 GW can expand to 60–70 GW, assuming 20 GW of additions during FY27–31, with the remaining growth expected to come from solar and BESS projects. 

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