20 Nov “Suzlon 2.0: What Lies Ahead -Post Turnaround?”
Suzlon’s Big Win: Riding the Wind of Success
Suzlon, along with eight other Indian companies are included in the MSCI Global Standard Index in its November index review. Being part of the India Standard Index is like getting a golden ticket because lots of worldwide passive funds pay close attention to these indices.
Now, why is that a big deal?
Well, any time stocks get included in these indices, it usually means more money (around $200 to $300 million inflow for Suzlon Energy.) flowing into the stock.
But wait, there’s more good news!
Suzlon’s S144 – 3 MW wind turbines got a special nod from the Ministry of New and Renewable Energy (MNRE). This nod, known as the RLMM listing, is like a green light for these wind turbines to hit the market.
It’s a big step for Suzlon, and people are cheering for them in the stock market.
Also Read: The Remarkable Turnaround of JLR: From Tata’s “Biggest Mistake” to a “Biggest Victory”
Suzlon Energy is a prominent player in the Indian energy sector, specifically focused on renewable energy solutions. Established in 1995, the company has been a trailblazer in harnessing wind power to meet the growing energy demands sustainably.
- Engaged in manufacturing, project execution, and operation and maintenance of wind turbine generators.
- Serves power utilities and electricity producers in both private and public sectors.
- Global presence with installations in 17 countries and 111+ wind farms, totaling 20+ GW of wind energy.
Business Details:
What sets Suzlon apart is its integrated approach to the wind energy business. The company engages in every aspect of the wind energy value chain, from designing and manufacturing wind turbines to providing end-to-end solutions for wind power projects.
Product Profile:
- S144 Wind Turbine Generator:
- Targets India’s low wind regimes with a capacity on a 3.x MW platform.
- S133 Wind Turbine Generator:
- Unlocks unviable sites with a 2.6 to 3.0 MW platform, suitable for all wind regimes.
- S120 Wind Turbine Generator:
- Available in 3 variants on a 2.1 MW platform, suitable for low wind sites.
- Classic Fleet:
- Phased out older models (S111, S97, S88, S82, S66, S52) but continues support, operation, and maintenance.
- S144 Wind Turbine Generator:
New Products :
- Introduced a customizable 3 MW product series accommodating site-specific requirements.
- Installed India’s tallest wind turbine at 160 meters in FY23 for maximum yields from low wind sites.
- Introduced the S144 wind turbine.
Services & Solutions:
Beyond turbines, Suzlon provides comprehensive solutions for wind energy projects. This includes site analysis, project planning, installation, and ongoing maintenance.
- Provides Operations and Maintenance Services for commissioned wind energy projects and Multi-make WTGs.
- Offers turnkey project services and solar energy solutions.
- Engages in the design, development, and manufacturing of major components for wind energy projects.
- Provides wind project planning and execution services.
Downfall & Recovery:
- Financial Struggles (2008):
- Undertook significant debt for global expansion during the 2008 economic cycle peak.
- Faced a market cap erosion of >95% and was on the verge of bankruptcy.
- Recovery (2014 Onwards):
- Slow recovery post-2014, capturing a 20% market share of the Indian Wind Turbine Market.
- Successfully navigated through financial challenges and embarked on a recovery journey
Financial Stability:
A consolidated net worth of INR 3,409 crores and reduced net debt of INR 600 crores showcase financial strength and prudent debt management.
The notable 61% reduction in finance costs in Q2 FY ’24 indicates efficient financial management.
Operational Excellence:
The completion of the RLMM listing for the 3 MW turbine and the commencement of commercial supplies showcase Suzlon’s commitment to operational excellence.
The thriving OMS business with 14.3 GW capacity in India underscores the effectiveness of Suzlon’s operations and maintenance services.
Cost Management and Profitability:
Suzlon’s focus on achieving the lowest cost per kilowatt hour in wind energy generation highlights a commitment to cost management and profitability.
The company’s belief in the cost efficiency of 2-megawatt and 3-megawatt turbines compared to 5-megawatt turbines further emphasizes this focus.
Order Book Strength:
Suzlon’s order book of 1,613 MW as of September 30, 2023, indicates a healthy demand for its wind turbines and services.
Emphasis on pursuing quality orders with higher value and better margins reflects a strategic approach towards profitability.
Segment-wise Analysis:
The Commercial and Industrial (C&I) segment representing two-thirds of the order book suggests a diversified customer base.
Orders for FY ’24 and FY ’25 amounting to 1.6 gigawatts with further projections indicating a balanced and planned approach to future growth.
Guidance and Future Plans:
Suzlon’s ambitious plans to add 4.5 to 5 gigawatts in FY ’24 and 6 to 7 gigawatts in FY ’25 reflect confidence in future market opportunities.
The development of technology for offshore turbines aligns with the industry’s future trends and potential growth area
Fundamentals:
- Market Cap ₹ 56,957 Cr.
- Current Price ₹ 42.3
- High / Low ₹ 44.0 / 6.95
- Return over 1year 422 %
- Book Value ₹ 2.53
- Face Value ₹ 2.00
Valuation: (High)
- Stock P/E 154
- Industry PE 39.1
- PEG Ratio 9.01
Growth: (Moderate)
- ROCE 20.8 %
- OPM 14.7 %
- Sales growth -14.2 %
- Profit growth 459 %
- Profit Var 3Yrs 27.4 %
- Sales growth 3Years 26.2 %
Debt Profile: (Almost Debt Free)
- Debt ₹ 146 Cr.
- Debt to equity 0.04
- Free Cash Flow ₹ 452 Cr.
- Int Coverage 2.36
- Cash Equivalents ₹ 211 Cr.
Unlocking the Winds of Opportunity in the Wind Energy Industry
- Onshore Wind Potential:
- India boasts a vast onshore wind potential, estimated at a whopping 695 GW (at 120m HH) and a staggering 1,164 GW (at 150m HH). This presents a massive canvas for harnessing wind energy across the country.
- Discontinuation of E-Reverse Bidding:
- A noteworthy shift in the wind energy landscape is the discontinuation of E-Reverse bidding, signaling changes in the procurement dynamics and paving the way for new avenues of project development.
- State-Specific Wind Bids and Tariff Pooling:
- Wind bids are taking a state-specific approach, introducing sub-bids and pooling of tariff. This localized strategy enhances efficiency and allows for tailored solutions based on regional requirements.
- Renewable Purchase Obligation (RPO) Trajectory:
- The Renewable Purchase Obligation (RPO) trajectory is on the rise, climbing from 24.61% in FY23 to an ambitious 43.33% in FY30. This emphasizes the commitment to increasing the share of wind energy in India’s overall energy mix.
- ISTC Charges Waiver for 25 Years:
- To incentivize Renewable Energy (RE) projects, there’s a waiver on Inter-State Transmission System (ISTS) charges for 25 years, applicable to projects commissioned until June 30, 2025, providing a significant boost to the sector.
- Lower Renewable Levelized Cost of Energy (LCOE):
- The decreasing cost of generating renewable energy results in a lower Levelized Cost of Energy (LCOE). This affordability is driving strong growth, particularly in the Commercial and Industrial (C&I) sector.
- Green Hydrogen Mission (GH2) and Ambitious Targets:
- The Green Hydrogen (GH2) Mission sets ambitious targets of 5 million metric tons per year, necessitating a robust RE infrastructure of 125 GW by 2030, positioning wind energy as a crucial player in achieving these goals.
- Repowering Potential:
- The National Institute of Wind Energy (NIWE) estimates significant repowering potential, reaching approximately 25.4 GW. Repowering involves upgrading older wind turbines with modern, more efficient ones, optimizing energy generation.
- Offshore Wind Potential:
- India is set to explore its offshore wind potential with the anticipation of its first offshore tender by December 2023, unlocking a new frontier for wind energy projects.
- Global Export Hub for Wind Components:
- Recognizing its expertise in wind energy, India has the potential to become a global export hub for wind components, contributing to the international supply chain and strengthening its position in the global market.
Understanding Risks: Navigating Challenges with Suzlon Energy
Before jumping into the world of Suzlon Energy, it’s essential to be aware of the potential challenges and risks that come with any investment. Let’s break it down into simple terms:
- Industry Risks:
- Suzlon operates in the renewable energy sector, and this sector can be influenced by changes in government policies, environmental regulations, or shifts in public opinion. Keep an eye on these factors.
- Financial Health:
- Suzlon’s financial health is crucial. Check for any signs of debt, as high levels could impact the company’s ability to grow and meet its obligations. Keep an eye on the balance sheet!
- Technological Challenges:
- The wind energy business is all about cutting-edge technology. If Suzlon faces challenges in developing or adapting to new tech, it could affect its competitiveness in the market.
- Global Economic Factors:
- Suzlon operates globally, so it’s influenced by what’s happening in the world economy. Economic downturns or global events can impact the company’s performance.
- Competition:
- In the business world, everyone’s competing for attention. Suzlon faces competition from other companies in the renewable energy space. Be aware of how they navigate this competition.
- Project Execution:
- Suzlon’s success depends on executing projects well. Delays or issues in project execution could impact the company’s financial performance.
- Customer Dependence:
- Suzlon’s clients are a big part of its story. If there are changes in relationships with key clients or a loss of major contracts, it could pose challenges.
Remember, every investment comes with its set of risks. Staying informed, doing your homework, and being aware of these potential challenges will help you make sound decisions when it comes to Suzlon Energy.
Please note that we are not SEBI-registered advisors or analysts. All the views shared in this article and all the content shared on aceink.com are only for learning and educational purposes. Any part of the article or any information on Aceink.com should not be interpreted or considered as investment advice. None of the opinions, views, or content posted on Aceink.com constitutes investment advice, as we are not SEBI-registered advisors or analysts.
DISCLAIMER:
We are not SEBI-registered advisors or analysts. All the views shared in this article and all the content shared on aceink.com are only for learning and educational purposes. Any part of the article or any information on Aceink.com should not be interpreted or considered as investment advice. None of the opinions, views, or content posted on Aceink.com constitutes investment advice, as we are not SEBI-registered advisors or analysts.
Aceink.com or any person associated with this website accepts no liability or responsibility for any direct, indirect, implied, or any other consequential damages arising directly or indirectly due to any action taken based on the information provided on this website. Please conduct your own research, and we suggest seeking investment advice only from a SEBI-registered investment advisor.
The views expressed by investment experts, broking houses, news and media houses, rating agencies, etc., are their own and not those of Aceink.com or its management. Aceink.com advises users to consult a SEBI-registered investment advisor before making any decisions.
——————
No Comments