Suzlon Energy Ltd. shares could see a significant 65% upside within a year, according to Religare Broking. The brokerage has set a price target of Rs 57 per share, up from the current market price of Rs 34.62, citing the company's robust order book exceeding 6 GW and improving execution capabilities as primary drivers for medium-term growth.
Despite this optimistic outlook, Religare highlighted that margin pressures persist, leading to a revision of its FY27 EBITDA margin estimate down to 15.8% from an earlier 18%. The firm maintains a 'BUY' rating on the stock, emphasizing the need to monitor margin recovery and timely project commissioning.
Record Deliveries and Project Commissioning
In Q2 FY27, Suzlon reported a substantial 26% year-on-year increase in turbine deliveries, reaching 710 MW compared to 565 MW in the previous year's corresponding quarter. This improvement signals enhanced execution and heightened project activity. However, approximately 1.25 GW of turbines remain erected but uncommissioned. Converting this inventory into revenue will depend heavily on securing timely grid connectivity and completing commissioning processes.
Management anticipates a significant ramp-up in the second half of FY27, expecting deliveries to be 1.5 to 1.65 times the H1 FY27 levels. This forecast is supported by the existing order book and the typically stronger second half of the financial year.
Revenue Growth Amidst Margin Headwinds
Suzlon's consolidated revenue for Q2 FY27 climbed 26% year-on-year to Rs 4,869 crore, primarily due to higher delivery volumes and improved execution. Nevertheless, the company faced margin pressures from several factors:
- Customer and project mix contributed 150-180 basis points of pressure.
- Commodity and forex inflation added approximately 50 basis points.
- Investments related to 'Suzlon 2.0' initiatives had an additional impact of about 100 basis points.
The persistence of these pressures led to the downward revision of the FY27 EBITDA margin estimate. Investors will closely watch how margins recover as execution volumes increase.
Strong Order Book Provides Revenue Visibility
Suzlon's cumulative order book stands at around 6 GW, offering roughly 18 months of execution visibility and underpinning its medium-term growth prospects. The company secured over 1.5 GW in fresh orders during H1 FY27, bolstering its project pipeline. Notably, more than 1.1 GW of these new orders originated from its development company (DevCo)-led business model, highlighting the growing contribution of its project development capabilities.
Public sector undertakings and commercial and industrial (C&I) customers collectively account for approximately 78% of the order book, providing a diversified customer base.
Suzlon 2.0: Transition to a Broader Renewable Solutions Provider
Suzlon is strategically evolving from a pure wind turbine original equipment manufacturer (OEM) into a comprehensive renewable energy solutions provider. This transformation, dubbed 'Suzlon 2.0', encompasses technology development, project development, EPC (Engineering, Procurement, and Construction) execution, and renewable asset management.
A key milestone in this transition was securing the first customer order for its S175 5 MW wind turbine platform, a higher-capacity model that strengthens the company's product portfolio and positions it for larger, more efficient wind installations. Beyond wind, Suzlon is exploring opportunities in solar power, battery energy storage systems (BESS), and integrated renewable energy solutions, aiming to expand its addressable market.
Key Factors for Investors to Monitor
Going forward, the pace of execution and margin recovery will be crucial determinants of Suzlon's financial performance. While management expects significantly higher deliveries in H2 FY27, which could improve manufacturing utilization and operating leverage, the benefits must be weighed against ongoing impacts from project mix, commodity inflation, foreign exchange movements, and investments in long-term expansion plans.
The 'Suzlon 2.0' transformation involves substantial investments in technology, higher-capacity turbine platforms, and manufacturing capabilities. These initiatives are designed to enhance long-term competitiveness but are contributing to near-term cost pressures. Investors should particularly monitor the conversion of the 1.25 GW erected turbine backlog into commissioned projects, fresh order inflows, the execution of the 6 GW order book, the rising EPC contribution, and the trajectory of EBITDA margins.