Suzlon Energy stock slumps 5% after independent director quits; Nuvama retains ‘buy’ rating

Shares of Suzlon Energy slumped over 5 percent in morning deals on June 10 as Marc Desaedeleer, an Independent Director at Suzlon, resigned w.e.f. June 8.

The reason stated in the resignation letter was instances that occurred where the cooperative governance standards applied by the company did not meet his expectations including situations where “communications lacked the level of openness and transparency” he expected.

Suzlon Energy CEO clarified that the issues raised were soft in nature and process-oriented, which would be implemented in due course. Management reiterated that all legal and financial disclosures have been fully complied with, as per regulations.

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Suzlon management in its statement sad, “None of the suggestions revolved around financial or operational irregularities or non-compliance with law. Suggestions were on the matters that did not meet Desaedeleer’s personal standard of expectations and speed of implementation.”

Note that Desaedeleer’s term was scheduled to end later this year in September.

Following Suzlon’s clarification, Nuvama Institutional retained its bullish call on the stock. Suzlon Energy shares closed marginally higher at Rs 49.90 on the National Stock Exchange (NSE) in the previous session.

So far in 2024, the stock has rallied over 30 percent, beating benchmark Nifty’s returns of 7 percent.

Suzlon Energy is capable of maintaining its leadership in WTG/turnkey EPC execution leading to 21 percent OB and 61 percent PAT CAGR over FY24–27E, Nuvama said in an earlier report initiating coverage on the stock with a ‘Buy’ rating and a target price of Rs 53.

“Peer group capital goods stocks with similar growth and RoE profiles trade at significant premiums,” it said.

Suzlon Energy is net debt-free and has secured a working capital tie-up with REC. According to analysts at Nuvama, the company is now well placed to capture its previous highs and sustain leadership.

The brokerage expects Suzlon Energy to maintain a market share of around 30 percent and show a strong pickup in order intake and execution.

Also Read | Suzlon Energy’s independent director quits over compliance, transparency issues

With Suzlon turning around its financial position and the operational ramp-up expected in FY25, the management is looking to address the needs of the business first, and intends to implement such best-in-class suggestions in due course.

“We, hence, find no reason to stray away from our ‘BUY’ thesis on Suzlon (unchanged TP Rs 53) driven by the upturn in the wind sector and financial turnaround of the company.

Recently, Morgan Stanley issued an ‘Overweight’ call on Suzlon, calling it a key beneficiary of India’s energy transition, well positioned to benefit from the move to greener, cleaner energy.

Over the next five years, Suzlon could see wind orders of around 32 GW or $31 billion. Earnings are likely to grow at a 57 percent CAGR from FY24 to FY27, the brokerage said in its note.

In the 12 months gone by, Suzlon Energy stock has delivered multibagger returns of over 245 percent, more than tripling investors money. In the last three years, the stock has delivered astronomical returns of 588 percent.

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