Suzlon Energy stock hits 5% upper circuit as Q1 net profit jumps 200% YoY

Continuing their stellar rally, shares of Suzlon Energy have attained another significant milestone in today's session by hitting a 14-year peak as investors reacted positively to the company's June quarter numbers, which were released on Monday, post market hours.

In the June quarter, Suzlon Energy achieved its highest wind turbine deliveries in seven years, reaching 274 MW, marking a 103% increase year-over-year. Revenue from operations surged to ₹2,016 crore, a 50% improvement from the previous year, while quarterly EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) hit ₹370 crore, the highest in seven years.

The company's profit after tax saw a remarkable 200% increase, reaching ₹302 crore. Its net cash position stood at ₹1,197 crore as of June 30, 2024.

Suzlon’s order book at the end of the June quarter reached a record 3.8 GW, the highest in its history. Gross debt was significantly reduced to ₹101 crore in Q1 FY25, down from ₹6,391 crore in FY22, as noted in the company’s earnings presentation.

Amidst this stellar performance, Suzlon Energy's stock hit the 5% upper circuit limit in today’s trading session, hitting a 14-year high of ₹58 per share.

Wealth creator

Following a lengthy period of decline from 2008 to 2019, the company's shares experienced a remarkable resurgence in 2020, achieving a 246% increase. This positive trend continued with gains of 60% in CY21, 13% in CY22, and a substantial 260% in the previous calendar year. The shares have further climbed by 51% so far this year.

This significant rise in share value is largely due to the company's consistent order wins, strategic focus on reducing debt, and efficient management of working capital.

In June, several domestic and international brokerage firms affirmed their optimistic outlook on the company's growth prospects, with ICICI Securities setting a target price of ₹60 per share and maintaining a 'buy' rating.

Favorable market conditions for India's wind industry

India's power demand is projected to rise substantially, with renewable energy sources expected to meet a significant portion of this growing demand. The Indian government has set an ambitious electricity generation target of 1,900 billion units (BU) for the fiscal year 2024–25, marking a notable increase of approximately 9.3% from the 1,738.828 BU generated in the previous fiscal year (2023–24).

As the world's third-largest energy consumer and fourth-largest producer of renewable power capacity additions, India has made considerable strides in the energy sector. The country ranks fourth in wind power and fifth in solar power, with a total installed power generation capacity of 442 gigawatts (GW) as of March 31, 2024.

Of this, 199 GW is derived from non-fossil fuel sources, accounting for 45% of the total capacity. In fiscal year 2023–24, renewable energy contributed approximately 71% to the nation's power capacity additions.

India's peak power demand has grown at an annual rate of over 5% over the past decade and is expected to continue rising, driven by efforts to electrify even the most remote villages. The country is anticipated to experience the highest increase in global energy demand growth until 2030, fueled by expanding economic activity and increased digitalisation across industrial, commercial, and residential sectors.

The goal of achieving 500 GW of non-fossil fuel capacity by 2030 has gained urgency due to recent developments emphasising energy security and the need for affordable, clean energy. To meet this target, the government plans to tender 50 GW of renewable energy projects annually through FY 2027–28.

This growth trajectory will predominantly be steered by the wind and solar energy sectors. Wind energy currently contributes 10% (43 GW) of the total installed capacity of 442 GW, and projections indicate that it will ascend to 13% (100 GW) by 2030.

Similarly, solar energy, which presently constitutes 19% (82 GW) of the total capacity, is forecast to burgeon to 38% (293 GW) by 2030, showcasing a substantial increase in its share of the overall power capacity.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.