Execution Picks Up Speed

Suzlon shipped 710 MW of wind turbines in the July-September quarter, its best second quarter on record and 26% more than a year earlier. First-half deliveries reached about 1,216 MW, up 21%. Commissioning, long the laggard, is finally closing the gap: it rose 69% from the June quarter to 454 MW, and another 1,295 MW of turbines stand erected and await grid connection.

Revenue Gusts, Profits Stay Becalmed

Revenue climbed 26% to Rs 4,876 crore, but EBITDA was unchanged at about Rs 720 crore and adjusted profit slipped 2% to Rs 394 crore. The year-earlier base excludes a one-time deferred tax credit; on a reported basis, profit fell 69% from Rs 1,279 crore. Depreciation jumped 48% as new capacity came on line.

Three Headwinds Behind the Margin Slide

ICICI Securities itemises the drop to 14.8% from 18.6%. Customer and business mix cost 150 to 180 basis points. Suzlon 2.0 set-up costs took about 100 basis points, and commodity and currency inflation linked to the West Asia war shaved about 50 basis points. The brokerage treats the inflation and the Suzlon 2.0 spending as "a passing cloud."

Segment results show where the pressure sits. The turbine business grew revenue 30% to Rs 4,212 crore, yet its segment result fell 23% to Rs 371 crore. Operations and maintenance did the opposite: revenue rose 11% to Rs 640 crore and the result jumped 51% to Rs 220 crore. By a TopNews calculation, O&M now earns about 36% of segment profit on about 13% of segment revenue.

Segment margins are TopNews calculations from the report's segment revenue and results.

Laying the Groundwork for Suzlon 2.0

Suzlon 2.0 recasts the company from a turbine maker into a wind-first renewable-energy platform that owns development, equipment, engineering and construction, and asset management across wind, solar and storage. ICICI Securities believes it could extend order and growth visibility beyond FY28.

Orders back the demand case. First-half orders totalled 1.5 GW, and about 1.1 GW, or more than 70%, came through the new DevCo development model. The company also expects export orders from next year.

EPC is rising in the mix. Projects where Suzlon also handles engineering, procurement and construction made up 38% of the order book in September, against a target of 50% by FY28.

The backdrop is supportive. India's wind installations crossed 6 GW in FY26, and the brokerage expects wind to matter more as tenders move from plain solar or wind to hybrid, round-the-clock and firm, dispatchable renewable power. As the market leader, Suzlon is a natural beneficiary.

A Back-Loaded Year and Deep Estimate Cuts

Management now guides for a 15% to 16% EBITDA margin in FY27, and ICICI Securities models 15.6%. The first half ran at about 15.1% on revenue of about Rs 8,705 crore, by a TopNews calculation. To meet the brokerage's full-year forecast, the second half must deliver about Rs 12,131 crore of revenue at roughly 16%. The second half is historically stronger, but that is a steep climb.

The brokerage cut FY27 EBITDA by 20% and profit by 26%, and FY28 EBITDA by 10% and profit by 12%, assuming lower margins and realisations.

Valuation and the Investor Target

ICICI Securities values Suzlon at 32 times FY28 estimated earnings, applied to forecast profit of Rs 2,392 crore, for an equity value of about Rs 75,360 crore, or Rs 55 a share. The stock trades at about 21 times FY28 earnings, near its 52-week low of Rs 36, after falling about 37% in 12 months. Market value is about Rs 50,600 crore, and promoters hold 11.7%.

For investors: the brokerage's 12-month target of Rs 55 implies about 49% upside from Rs 37. Given the cut estimates and a back-loaded year, building positions in stages, with the December quarter's margin as the first checkpoint, looks more prudent than a single purchase.

Risks on the Beaufort Scale