Suzlon Energy hits 9-year high; up 5% on strong Q2 results, order book
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Shares of Suzlon Energy hit nine-year high of Rs 34.44, up 5 per cent on the BSE in Friday's intraday trade, after the company reported 82 per cent year-on-year (Y-o-Y) rise in its consolidated profit after tax (PAT) at Rs 102 crore for the September quarter (Q2FY24) mainly due to decline in expenses. The company had posted PAT of Rs 56 crore in the year ago quarter. Shares of Suzlon Energy were quoting at their highest level since June 2014. It surpassed its previous high of Rs 34.10, touched on October 23. Thus far in the financial year 2023-24, the market price of Suzlon Energy has zoomed 335 per cent from a level of Rs 7.90 at the end of March 2023.
In Q2FY24, Suzlon Energy's net revenue declined to Rs 1,417 crore from Rs 1,430 crore in the same period a year ago. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins (pre-FX) expanded 130 bps Y-o-Y to 15.8 per cent from 14.5 per cent in Q2FY23. However, despite a slightly lower Y-o-Y volume, the company said it has recorded higher Ebitda owing to healthier margins. At the end of Q2FY24, Suzlon Group's orderbook stands at a healthy 1,613 MW with a fair split between the S120 and S144 turbine orders, thereby giving the company a sustainable supply pipeline to work with.
On the back of a successful qualified institutional placement (QIP) conclusion in August 2023, the company has been debt free, thereby leading to further reduction in quarterly net finance cost by around 61 per cent Y-o-Y. Meanwhile, in September, CRISIL Ratings had upgraded its ratings on the bank facilities of Suzlon Energy with positive outlook. The rating upgrade factors in sharp reduction in debt (paying off the entire term debt) done from the proceeds of a recent QIP aggregating Rs 2,000 crore. The fund-based borrowings are also expected to remain nominal because of healthy cash flow generation from the operations and maintenance (O&M) services business and no material debt funded capex plans.
Further, business profile of wind turbine business has improved as seen through lower breakeven volumes and other steps taken for further operating margin protection. Suzlon Energy has taken cost optimisation and rationalisation efforts over past two to three years. And as a result, wind turbine business had been able to achieve Ebitda of Rs 48 crore in fiscal 2023 with execution volume of 664 MW. Additionally, company has taken other steps for operating margin protection such as focussing on orders with better margins, receivable profile and pass-through for material cost escalation, CRISIL Rating had said in rationale. Positive outlook reflects expectation that profitability of Suzlon Energy (consolidated) would further grow and achieve Ebitda above Rs 750 crore in fiscal 2024. This is expected to be driven by increasing fleet base of O&M business and positive tailwinds in Indian wind sector leading to expectation of increase in execution volumes, rating agency said.
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