Fundamental Analysis of Suzlon Energy Limited

About Suzlon Energy Limited

Founded in 1995, Suzlon Energy Limited is one of the leading global renewable energy solution providers, which is involved in the manufacturing of wind turbine generators and related components. Over the past two decades, Suzlon has installed over ~20.5 GW of wind energy in 17 countries across six continents.

Currently, Suzlon is the custodian of Wind Turbine Generators (WTG) assets of over US$10 billion. The company is using advanced infrastructure to service 9,980+ WTGs with a total installed capacity of over ~20.5 GW as of December 31, 2023. Suzlon has more than 2.5 million cumulative hours of servicing experience on this WTG.

Business Segments of Suzlon Energy

• Sale of Wind Turbine Generator (WTG): Suzlon manufactures and sells wind turbine generators and related components, including sale/sub-lease of land and project execution. It produces blades, nacelles, towers and foundations. During Q3 FY 2024, the company generated ~62% of total revenue from the sale of wind turbine generators.
• Operations and Maintenance Services (OMS):  Suzlon provides operation and maintenance services to wind turbine generators and utility-scale solar farms. Under this segment, the company provides services, such as repair of damage caused by extenuating conditions; stocking of spares, including no longer manufactured but only maintained, at pivotal locations; equipment service to counter the regular wear and tear of parts; and regular services and enhanced services. This segment contributed ~32% to the total revenue in Q3 FY2024.
• Foundry and Forgings: Suzlon is engaged in the sale of fully-finished castings and forgings and foundry components. It serves customers in the wind, construction, transportation, industrial machinery, oil & gas, mining, power, defence and aerospace sectors. Under castings, the company deals with casting products such as main frame/bed plates, rotor hubs, rotor shafts, gearbox housing, gas engine/generator frame, planetary carrier and small castings. The company’s forging products include tower flanges, bearing and forging rings and connector forgings. The foundry division posted a contribution of 6% of revenue in Q3 FY2024.

Industry Overview

India’s energy demand is likely to increase more than that of any other country in the coming decades due to its sheer size and enormous potential for growth and development. Electricity demand in the country has increased rapidly and is likely to rise in the upcoming years. In order to meet the increasing demand for electricity in the country, a massive addition to the installed generating capacity is required.

The Indian wind market is 4th largest in the world. As of June 2023, India possesses ~13 GW of wind pipeline. Investor interest in the sector has increased as a result of the government’s enhanced assistance and better economic conditions. Renewable energy is likely to play a significant role as India attempts to fulfil its own energy demand, which is projected to reach 15,820 TWh by 2040. In addition to the onshore wind potential of 695 GW (120 HH) and 1,164 GW (150 HH), the industry’s demand is driven by wind bids with state-specific sub-bids, tariff pooling, and an RPO trajectory of 29.91% (FY24) to 43.33% (FY30) with wind-specific RPO.

Suzlon Latest News

Suzlon Group recently secured an order for the supply of WTGs for a 642 MW wind power project from an Evren Company, ‘ABC Cleantech Private Limited (ACPL)’. Evren is a joint venture in India between Brookfield and Axis Energy. The company plans to deploy 214 wind turbine generators (WTGs) in Andhra Pradesh, each with a rated capacity of 3 MW and a Hybrid Lattice Tubular (HLT) tower.

Suzlon will install and commission the project’s wind turbines as well as provide equipment as per the terms of the deal. Following commissioning, Suzlon will also handle all operations and maintenance services.

Suzlon Financial Performance

During Q3 FY2024, the company solidified its business momentum with a robust performance and a substantial influx of new orders from its marquee customers. The company recorded a rise in revenue to ₹1,553 crore against ₹1,449 crore in Q3 FY 2023. This quarter showcased impactful policies propelling India’s renewable energy vision ahead. The business’s performance has steadily improved across all metrics, as evidenced by its better margins, net cash position, and greater YoY EBIDTA. With a consolidated PAT of ₹203 crore, it reported another profitable quarter, continuing its recent trend.

At the end of FY23, the company noted an uptick in order books, with the rolling out of the highly competitive 3 MW WTG series providing revenue visibility. Suzlon’s net worth has turned positive at ₹1, 099 Crore after a decade in FY23. The company witnessed a substantial reduction in debt due to refinancing and rights issues accomplished during FY23.

Future of Suzlon

Suzlon is committed to providing world-class, innovative, and integrated Renewable Energy solutions to power the nation’s growth on the back of rapid ramp-up of Renewable Energy installations, deeper penetration of renewables in the economy and wider adoption of clean energy. As of December 31, 2023, the company recorded a wind order book of 3,157 MW. This order book includes orders of 867 MW received in January 2024. These orders comprised 225 MW orders secured from Everrenew and 642 MW orders secured from Evren Company’s ABC Cleantech Private Limited.

Conclusion

In the global fight against climate change, India’s announcement of its audacious objectives to add 500 GW of non-fossil fuel capacity by 2030, achieve net-zero emissions by 2070, and fulfil 50% of its electricity demands from renewable energy sources by 2030 represents a significant turning point. The company is undertaking significant steps to achieve the country’s objectives, which are likely to enhance the company’s future growth.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.