Transitioning from turn-around to a growth story
We recently hosted Mr. J.P. Chalasani, Group CEO of Suzlon Energy (SUEL), for an expert session on the wind industry. Mr. Chalasani has reiterated his long-term commitment to SUEL, highlighting that his position as CEO carries no defined sunset clause. He noted that an approved list of models and manufacturers (ALMM) in wind turbine generator (WTG) manufacturing is likely the first step toward reducing India’s import dependence, with the government possibly extending localization mandates further in the coming years. He believes that foreign OEMs’ transition to building domestically may entail multiple complex and time-consuming challenges. However, more details about the localization order are still awaited and can add to the complexity of indigenization.
Overall, we continue to believe SUEL remains well-placed to benefit from favorable policy tailwinds, localized supply chain advantages, in-house R&D, and execution readiness vs. global and domestic peers. We reiterate our BUY rating on SUEL with a target price of INR80
Valuation and view
We arrive at our TP of INR80 for SUEL by applying a target P/E of 35x to FY27E EPS. This is at a slight premium to its historical average two-year fwd P/E of 27x, given execution and earnings are just picking up for SUEL.
SUEL stands to benefit from regulatory tailwinds mandating local content (ALMM for wind), a robust order book providing strong revenue visibility, and execution improvements through proactive land acquisition and EPC expansion initiatives.
