Suzlon Energy Ltd. has seen its share price targets sharply reduced by at least six prominent brokerages following its second-quarter earnings report, which largely trailed analyst expectations. Despite a 25.96% year-on-year revenue growth, the renewable energy solutions provider's Ebitda margin disappointed, leading to a significant miss on profitability.
Brokerages React to Q2 Performance
Several major financial institutions adjusted their outlooks for Suzlon's stock. UBS, while retaining the highest target, lowered its projection to Rs 58 from Rs 66. Investec followed suit, cutting its target to Rs 56 from Rs 67. ICICI Securities and Ambit Capital now both target Rs 55, down from Rs 65 and Rs 59 respectively. Axis Capital made a substantial cut, reducing its target to Rs 42 from Rs 63, and also downgraded the stock from 'Buy' to 'Add'. Nuvama Institutional Equities likewise trimmed its target to Rs 41 from Rs 51.
Despite these cuts, at least five brokerages maintained a 'Buy' rating on the stock, with the revised targets suggesting a potential upside of up to 58 per cent for Suzlon shares.
Deeper Dive into Suzlon's Q2 Financials
For the September quarter, Suzlon Energy reported a consolidated net profit of Rs 394.15 crore, marking a 69.19% year-on-year decline compared to Rs 1,279.44 crore in the corresponding period last year. Revenue from operations, however, grew to Rs 4,869.05 crore from Rs 3,865.54 crore in Q2 FY26. The company demonstrated strong execution with volumes at 710MW, exceeding estimates of 690MW.
The primary concern stemmed from the Ebitda margin, which came in at 14.8%, resulting in a 10% miss on both Ebitda and adjusted profit after tax. Nuvama noted, "Margin weakness reflects forex/commodity headwinds (50 bps) and Suzlon 2.0 costs (100 bps), with normalised margin at 16.5-17 per cent." Furthermore, cash conversion remained weak, with receivables and inventory increasing by Rs 540 crore and Rs 950 crore respectively, driving a negative operating cash flow (OCF) of Rs 180 crore.
Outlook and Future Projections
Nuvama highlighted Suzlon as a key beneficiary of the increasing share of FDRE/RTC/hybrid tenders and Public Sector Undertaking (PSU)-led projects, supported by a robust captive exposure that constitutes 78% of its order book. However, the brokerage anticipates the wind industry to plateau at 8-10GW over the next two to three years.
While Suzlon's FY31 targets are seen as encouraging, Nuvama suggests that growth is likely to be back-ended and dependent on the success of its DevCo venture, where it is considered a late entrant. Consequently, Nuvama has cut its FY27/28E EPS by 9% and 7% respectively, and introduced FY29E projections, retaining a 'HOLD' rating with a target of Rs 41.