Shares of Suzlon Energy Ltd declined by 2% to Rs 55.89 on August 28, 2023, reaching their lowest point in three months. This marks the third consecutive day of losses for the company, contributing to an overall decline of 8% during August. The stock is now on track for its third straight monthly loss, a concerning trend for investors.
Investors are increasingly cautious about the company’s future, driven by execution challenges and disappointing earnings reports. Suzlon’s recent quarterly performance revealed significant setbacks, particularly in project execution, which has slowed considerably over recent months. The current situation is exacerbated by the upcoming departure of Group Chief Financial Officer Himanshu Mody, whose tenure has been pivotal in stabilizing the company’s financial standing. His exit raises questions about leadership stability, further unsettling investors.
Challenges in Execution and Leadership
The decline in share price mirrors broader concerns in the renewable energy sector, where Suzlon has faced increasing pressure. Installations have lagged behind anticipated delivery schedules, and new orders for the fiscal year 2026 have only reached 1 GW, a figure that falls short of market expectations.
To counter these challenges, Suzlon is concentrating on land-ready projects and expediting land acquisitions to enhance project commissioning timelines. This strategic realignment aims to provide better execution visibility beginning in fiscal year 2027. Despite these initiatives, the unexpected resignation of the CFO has raised additional concerns regarding the company’s operational leadership.
Maintaining a robust order book of 5.7 GW for the tenth consecutive quarter, Suzlon benefits from growing demand, particularly from commercial and industrial sectors as well as public sector units. This strong demand for renewable energy remains a positive driver amid ongoing uncertainties.
Positive Industry Outlook and Analyst Perspectives
The renewable energy market continues to attract significant investment globally, with analysts suggesting that this could provide some revenue visibility for Suzlon over the next two to three years. However, potential risks remain, particularly concerning delays in Power Purchase Agreements (PPAs) and issues surrounding land acquisitions.
Management has remained optimistic, projecting a growth rate of 60% in deliveries, revenue, and EBITDA for fiscal year 2026. They anticipate that India will add 6 GW of wind capacity in FY26 and between 7-8 GW in FY27. Such targets reflect a strong commitment to expanding India’s renewable energy capacity, critical for achieving sustainable development goals.
Brokerages are cautiously optimistic about Suzlon’s future. Geojit Financial Services has upgraded the stock to a “buy” rating, albeit with a reduced target price of Rs 75 due to execution delays. They forecast earnings will compound at a 43% CAGR and predict a return on equity at 27.1% by FY27. Similarly, ICICI Securities maintains a buy rating with a price target of Rs 76, citing confidence in the company’s order pipeline.
While Suzlon navigates through these turbulent waters, its solid order book and positive industry trends indicate that long-term prospects remain intact. Despite the recent stock correction, there may be opportunities for investors, provided the company can effectively manage its execution challenges and maintain operational discipline.
