Suzlon Energy’s 6.1GW order book supports growth despite first-quarter margin pressure

Investment View and First-Quarter Performance

Motilal Oswal Financial Services Limited (MOFSL) retains its Buy view on Suzlon Energy following a soft 1QFY27, while describing the company as remaining on track for growth. Consolidated revenue increased 22 per cent year on year to Rs 3,829.1 crore, but declined 30 per cent quarter on quarter. Revenue was 2 per cent below MOFSL’s estimate, as wind turbine generator deliveries of 506MW fell short of the broker’s 532MW expectation. Nevertheless, the 506MW delivery was Suzlon Energy’s highest-ever first-quarter delivery.

Reported EBITDA declined 1 per cent year on year and 38 per cent quarter on quarter to Rs 595.2 crore. The EBITDA margin contracted by 358 basis points year on year to 15.6 per cent, compared with MOFSL’s estimate of 17.6 per cent. Adjusted PAT fell 6 per cent year on year and 60 per cent quarter on quarter to Rs 305.2 crore, missing the broker’s estimate by 26 per cent.

The margin shortfall reflected lower wind turbine generator contribution margin, higher-than-expected other expenses and delivery disruption caused by Middle East geopolitical tensions. These tensions affected fuel availability and the transportation of critical execution equipment, including cranes, trailers and vehicles. Wind turbine generator contribution margin declined to 23.4 per cent from 26 per cent in 1QFY26 and 24.5 per cent in 4QFY26, partly because of a changing scope mix.

Execution, Deliveries and Order Book

Management said temporary supply-chain and logistics disruptions deferred around 10 per cent to 20 per cent of deliveries, which it expects to recover in subsequent quarters. Installation or commissioning increased to 269MW from 117MW in 1QFY26. More than 1,257MW of turbines had been erected but were awaiting commissioning, supporting an expected increase in commercial operation dates.

Management maintained its normal delivery seasonality expectation of 35 per cent to 40 per cent in the first half and 60 per cent to 65 per cent in the second half. Suzlon Energy’s order book stood at 6.1GW, with 84 per cent from public-sector undertaking (PSU) and commercial and industrial customers. The PSU and commercial and industrial segments contributed equally to the order book.

The DevCo model booked more than 600MW within four months and accounted for 60 per cent of orders. Investment in the model is capped at Rs 500 crore. Average realisation increased to Rs 6.3 crore per MW from Rs 5.6 crore per MW as the engineering, procurement and construction (EPC) share rose to 32 per cent from 22 per cent in 1QFY26.

Margins and Operating Metrics

Management expects FY27 EBITDA margin of 17 per cent to 18 per cent, with a possible variation of plus or minus 1 per cent to 2 per cent. It attributed some of the 1QFY27 margin pressure, estimated at Rs 40 crore to Rs 50 crore, to upfront investment in the Suzlon 2.0 strategy. OMS margin was 43 per cent in the quarter, while management seeks to maintain approximately 38 per cent to 39 per cent.

Growth Options and Capacity Expansion

Management highlighted growth options in repowering, solar operations and maintenance, battery energy storage systems (BESS) and exports. It expects to secure confirmed Indian repowering orders by FY27-end and has identified up to 25GW of domestic repowering potential.

Suzlon Energy launched its S175 5MW turbine and secured its first customer order. Around Rs 700 crore of FY27 capital expenditure is planned for capacity expansion, including new factories and a migration from 3MW to 5MW turbine manufacturing.

Management targets 10GW of FY31 sales, with a 75:25 wind-solar mix. It has identified more than 20GW of addressable solar O&M assets, expects to finalise BESS partnerships within a couple of months and targets 3.1GW of BESS capacity by FY31.

Valuation and Earnings Outlook

MOFSL values Suzlon Energy at 30 times FY28E EPS of Rs 2.2, modestly above its historical average two-year forward P/E of 27 times. This approach results in a Rs 65 target price.

Key Monitorables

• The pace of order inflows through FY27 and FY28.
• Wind turbine generator deliveries and installations through FY27 and FY28.
• Wind turbine generator contribution margin.