Is it Good to Buy Suzlon Shares Now? A Deep Dive into the Financials in 2024

In this article, we will discuss:

• Suzlon Energy: An Overview
• A Closer Look at Suzlon’s Financials in 2024
• Is it Good to Buy Suzlon Shares Now: Other Aspects to Consider
• Is it Good to Buy Suzlon Shares Now: The Verdict
• Frequently Asked Questions

Suzlon Energy: An Overview

Suzlon Energy Limited, established in 1995, is a prominent player in India’s renewable energy sector. The company, which is headquartered in Pune, has carved a niche for itself as one of the leading global wind turbine manufacturers. Its comprehensive portfolio of products and services encompasses the entire lifecycle of wind energy projects — right from manufacturing wind turbine generators and providing installation to commissioning services and operations and maintenance services.

Suzlon's innovation-driven approach has led to the development of technologically advanced and cost-effective wind turbines and made renewable energy more accessible and affordable. The company has a strong international presence and is committed to augmenting India’s efforts to reduce its carbon footprint and promote eco-friendly energy solutions. 

Despite facing financial challenges in recent years, Suzlon is turning things around and continues to play a significant role in the global shift towards renewable energy. If you are wondering whether it is good to buy Suzlon shares now, the financial analysis in this article can help you make an informed decision.

A Closer Look at Suzlon’s Financials in 2024

To answer the question of whether or not it is good to buy Suzlon shares now, we need to decode the company’s financials and assess what the different financial metrics and ratios indicate about the company’s prospects. Here’s a deep dive into the financials of Suzlon Energy for the most recent fiscal years. 

• Revenue and Profitability 

Suzlon Energy has been consistently recording high revenues over the past few years. The company’s revenue grew from over ₹2,972 crore in FY20 to ₹3,345 crore in FY21 and ₹6,581 crore in FY22. In the next year, the revenue dipped slightly, to ₹5,970 crore. 

In terms of profitability, the company has both upsides and risks. While it recorded losses in FY20 and FY22, Suzlon earned around ₹104 crore of profits in FY21. In the most recent fiscal year, i.e. FY23, the company’s profits shot up to over ₹2,849 crore, drawing the attention of investors across India.

• Debt Profile

The company’s debt profile is another aspect to consider before deciding if it is good to buy Suzlon shares now. Historically, its high debt levels have often dragged the company down in terms of how attractive (or not) it is for investors. However, in recent years, Suzlon has done a stellar job of reining in its dependence on debt. 

The company’s long-term debt shrunk from ₹6,027 crore in FY21, to ₹5,592 in FY22 and ₹1,517 in FY23. This rapid and massive debt reduction has worked in the company’s favour. That said, Suzlon’s long-term debt-to-equity ratio for FY23 was still high, at 139.68. This may be a red flag for investors who prefer companies that are not so highly leveraged.

• Financial Ratios

Suzlon’s financial ratios appear to be a mixed bag. Here’s a closer look at the top ratios: 

• Net Interest Coverage Ratio

Despite its shrinking debts, the company’s net interest coverage ratio for FY23 was only 1.57, which is extremely close to the threshold of 1.50 — suggesting that the company is generating enough earnings to cover its interest expenses, but not by a wide margin.

• Debt-to-Equity Ratio

Its total debt-to-equity ratio for FY23 was 1.76, which is below the risky threshold of 2.0, but still above the preferable D/E ratio limit of 1.0. If Suzlon continues to raise capital and reduce debt, it may result in a more favourable D/E ratio in the coming years. 

• Price-to-Book Ratio

On the flip side, the company’s price-to-book ratio in the most recent fiscal year was 56, which is exceptionally high for value investing. Such a high P/B ratio points to significant overvaluation.

• Price-to-Earnings Ratio

To assess if it is good to buy Suzlon shares now, let’s consider the following P/E ratios for Suzlon Energy over the past fiscal year:

Taken together, these values point to a wide fluctuation in the company's valuation over the past year and an exceptionally high valuation based on normalised earnings. This suggests significant volatility in investor sentiment and potentially speculative expectations for the company's future earnings growth. The extremely high and low P/E ratios within 12 months could also indicate market reactions to temporary events. 

Is it Good to Buy Suzlon Shares Now : Other Aspects to Consider

In addition to the financials, it’s also essential to look into other aspects before you decide whether or not it is good to buy Suzlon shares now. Some such factors include the following: 

• Stock Market Returns

In the six months preceding December 2023, Suzlon delivered multi-bagger returns of 274% — rising from around ₹11 to over ₹39 during this period. It also recorded a massive 979% jump in the last three years. 

• Post-Budget Performance

Suzlon also performed exceptionally well in the aftermath of the interim budget, hitting its 12-year high in the trade sessions that followed. The rally was the direct result of the government’s plan to offer funding for developing offshore wind energy capacity. 

• Strong Order Book

In addition to its recent multi-bagger returns and rallies, Suzlon’s shares are also backed by a strong order book, which stood at over 1,600 megawatts by the end of Q2 in FY24. The company has also won subsequent orders worth 50 megawatts. 

Is it Good to Buy Suzlon Shares Now : The Verdict

Based on its market performance and financial analysis, Suzlon Energy presents a compelling case for investment, despite some concerns. The company's significant profit increase in FY23 and dramatic debt reduction highlight a strong turnaround. However, a high long-term debt-to-equity ratio and an exceptionally high P/B ratio suggest caution due to overvaluation risks. So, as experts suggest, investors need to approach Suzlon shares with cautious optimism.

If you decide that it is good to buy Suzlon shares now, download the Samco trading app and tap into a world of benefits available exclusively to Samco’s community of online traders and investors. 

Frequently Asked Questions

• Which industry does Suzlon Energy belong to? 

Ans. Suzlon Energy is a wind turbine manufacturer that is a part of India’s energy sector. More specifically, the company operates in the renewable energy segment. 

• Is it good to buy Suzlon shares now ?

Ans. Given Suzlon's significant profit growth and debt reduction offset by valuation concerns, buying its shares now warrants cautious optimism. Investors should consider the potential for growth against the company’s high valuation metrics.

• Is Suzlon currently better suited for long-term or short-term investing? 

Ans. Suzlon Energy currently appears to have good short-term prospects, given its post-budget rally and multi-bagger returns. However, the company’s consistent profitability coupled with its shrinking debt books may also point to potentially favourable long-term prospects. 

• Is Suzlon Energy profitable?

Ans. Yes, Suzlon Energy has been profitable in the most recent fiscal year, despite recording losses in the year before. 

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