Recent assessments by brokerage firm Ventura Securities suggest that shares of Suzlon Energy Ltd. may decline to ₹50 each from their current price of ₹69. This analysis reflects differing opinions among various brokerages regarding the stock’s valuation and market potential. Let’s explore the reasoning behind the reduced targets for this wind energy company.
Ventura Securities’ Perspective
Ventura Securities has stated in a recent note that while Suzlon Energy Ltd. operates a solid business, its current valuation is not justified. The firm has recommended a “sell” rating, projecting a target price of ₹50 over the next 24 months. This target is significantly lower than the ₹81 price target set by JM Financial, which anticipates market performance over the next 12 months. Similarly, Nuvama Institutional Equities has set a one-year target price of ₹67 for the stock.
According to Ventura, their recommended target price indicates a 27.5% decline from the current price of ₹69. They argue that while the company holds a strong market position, the current stock price does not accurately reflect the risks associated with cash flow generation, execution, and overvaluation.
Domestic Brokerage Insights
Domestic brokerages have acknowledged that Suzlon Energy holds a 32% market share in India’s wind turbine sector and operates with a fully integrated operational model. They note that the company has returned to a net cash position in FY24, marking the first time since FY06 that it has achieved this milestone. After years of financial challenges, Suzlon has successfully navigated its way back through asset sales, debt restructuring, and favorable industry support.
The strong order book, bolstered by partnerships with firms like Inox Wind, indicates a revival in the wind turbine market, which has been growing since FY17. Additionally, competition in the sector has diminished as major players have exited, allowing Suzlon Energy and Inox to solidify their dominance in the market.
Future Demand and Market Conditions
Despite the cautious outlook from some brokerages, others believe that Suzlon is well-positioned to meet demand over the next 3-4 years. The company has improved access to capital, enhancing its ability to execute on new projects. Strong market demand, coupled with limited competition, could provide a solid foundation for growth.
Disclaimer: This information is for informational purposes only and should not be considered as investment advice. It is recommended to consult a financial advisor before making any investment decisions.
