In recent trading sessions, shares of Suzlon Energy, a prominent midcap stock in the renewable energy sector, experienced a notable downturn, plummeting 5 percent to ₹70.98 during intra-day trading on October 7. This marks an alarming trend as the stock has seen a decline for eight consecutive sessions, resulting in a cumulative drop of over 15 percent since September 25.
This steep decline was prompted by an ‘advisory cum warning’ issued by the BSE and the NSE. The exchanges raised concerns regarding Suzlon Energy’s corporate governance practices, particularly following the resignation of independent director Marc Desaedeleer. Both exchanges have underscored that any future non-compliance with governance standards will be dealt with rigorously.
In response to the criticism, Suzlon Energy reaffirmed its position, asserting that it anticipates no significant impact on its financial or operational capabilities resulting from the advisory. This statement aims to quell investor concerns amidst the recent bearish sentiment affecting the stock.
Current Stock Performance Overview
Despite the ongoing decline in recent sessions, it’s essential to highlight that Suzlon Energy shares have exhibited impressive growth over the past year. The stock has surged nearly 157 percent over the last twelve months. Additionally, over the past five years, Suzlon Energy has demonstrated remarkable resilience with an astounding gain of more than 2,850 percent, highlighting its potential as a multibagger stock.
As of 2024, Suzlon Energy continues to showcase robust performance, with the stock rising approximately 86 percent year-to-date. Although the stock has delivered positive returns in seven out of the ten months this year, it has faced challenges, being down over 11 percent thus far in October, following a string of six consecutive months of gains since April.
Earlier in the year, the stock experienced minor corrections, registering a decrease of 1.5 percent in February and 11 percent in March. However, it started the year with a strong performance, gaining over 20 percent in January, indicating a volatile yet promising upward trajectory.
Future Prospects and Predictions
In a recent analysis, brokerage firm Nuvama Alternative Research projected that Suzlon Energy could transition to a large-cap stock by February 2025, as classified by the Association of Mutual Funds in India (AMFI). Currently categorized as a mid-cap stock with a valuation threshold of ₹27,500 crore, the company is anticipated to meet the revised large-cap cutoff, which is expected to rise to ₹1 lakh crore from the current ₹84,000 crore based on market capitalization levels.
At one point, Suzlon Energy briefly exceeded the large-cap threshold, reaching a market capitalization of ₹1 lakh crore. However, due to recent price corrections, its market capitalization has now reduced to ₹97,075 crore. Although there is potential for reclassification, Nuvama’s report suggests that this shift may not significantly attract new inflows, as fund managers routinely recalibrate their positions ahead of changes in the AMFI classification.
Positive Developments Amidst Challenges
In the midst of these market fluctuations, global brokerage firm Morgan Stanley has reasserted its ‘Overweight’ rating on Suzlon Energy. This positive outlook follows the company securing a substantial order of 1.17 GW from NTPC. Morgan Stanley has set a target price of ₹73 for Suzlon, citing that this new contract enhances the company’s earnings visibility for FY26-27, offering a mitigating factor against the current turbulence.
Suzlon Energy’s contract with NTPC Green Energy, a subsidiary of NTPC Limited, involves the installation of 370 wind turbine generators (WTGs) of the S144 model, each with a rated capacity of 3.15 MW. These turbines are poised to be utilized in key projects for NTPC Renewable Energy and Indian Oil NTPC Green Energy Pvt Ltd in Gujarat, solidifying Suzlon’s position in the expanding renewable energy market.
While Suzlon Energy faces immediate challenges from corporate governance concerns, its long-term outlook remains considerably promising. The company’s leadership in renewable energy, strategic partnerships, and the influx of new orders position it favorably for future growth and expansion. Investors are likely to be vigilant, monitoring how the company navigates its current difficulties while capitalizing on the myriad opportunities available in the market.
Disclaimer: The insights and analyses provided herein are those of individual analysts or brokerage firms and do not reflect the opinion of any authoritative body. Investors are strongly encouraged to consult certified financial experts before making any investment decisions.
