Why Suzlon Energy Share Price is Falling

The renewable energy sector in India has seen significant growth in recent years. The government aims to achieve ambitious renewable energy targets to reduce carbon emissions. India has set a target of reaching 500 GW of renewable energy capacity by 2030.

This rapid shift towards cleaner energy sources has drawn increased investments and competition in the renewable energy market. Suzlon Energy is a major player in India's renewable energy sector.

Founded in 1995, the company focuses on wind energy and manufactures wind turbines for power generation. Suzlon is known for its contributions to India's wind energy capacity and operates across multiple countries.

Recently, Suzlon Energy's share price has been a focal point for investors. In just five days, the stock dropped by 20.5%. This decline followed a key announcement, which led investors to scrutinise the company's performance.

Let's examine the quarterly results of Suzlon Energy to understand the reasons behind this sudden drop in its share price.

Leadership Transition

Suzlon Energy recently announced the resignation of Ishwar Chand Mangal, the CEO of New Business, effective 8 November 2024. Mangal, who has been with Suzlon for nearly 30 years, decided to leave to pursue new opportunities outside the company.

Over his extensive career with Suzlon, Mangal held key roles in various business areas such as sales and marketing, business development, EPC projects, global OMS, and offshore wind initiatives.

He was instrumental in the company's growth and strategic expansions in renewable energy, making his departure a significant shift for the company.

Mangal's departure has raised investor concerns about Suzlon's leadership stability, especially as he was a senior management professional (SMP) with extensive knowledge and experience in the renewable energy sector.

His exit marks the end of an era for Suzlon, as he had witnessed and contributed to the commissioning of Suzlon's first wind turbine generator (WTG) in India and continued through to its 15th GW WTG domestically and 21st GW WTG globally.

The announcement of his resignation has likely contributed to the recent decline in Suzlon's share price. Investors might be wary of potential impacts on the company's strategic direction and operational efficiency following Mangal's departure.

The investor sentiment around Suzlon Energy may be negative at present but it delivered a strong financial performance in Q2 FY25. On 29 October 2024, the company declared stellar Q2 results, let's take a look at the Q2 results.

Stellar Quarterly Results

Suzlon Energy significantly increased its execution capacity, achieving 274 MW in Q2 FY25 compared to 132 MW in Q2 FY24.

This expansion led to net revenue of Rs 20.9 billion (bn), marking a 48% rise from the previous year. The increase in execution reflects the company's focus on scaling production to meet rising demand in the renewable energy sector.

In Q2 FY25, Suzlon's net profits surged by 96% to Rs 2 bn, up from Rs 1 bn in the same quarter of the previous year. This impressive profit growth can be attributed to higher execution volumes and improved operational efficiency.

By the end of September 2024, Suzlon's S144 wind turbine model had accumulated a solid order book of 4.7 GW. To meet this demand, the company is expanding its production capacity for this model. A strong order inflow of 1.6 GW in the quarter pushed Suzlon's total order book to a record 5.1 GW, ensuring a stable revenue outlook for the coming quarters.

During the quarter, Suzlon also secured India's largest wind energy order of 1,166 MW from NTPC Green Energy. This high-profile contract demonstrates Suzlon's growing position in the wind energy market and boosts its long-term revenue visibility.

Suzlon's revenue comes primarily from two segments: wind turbine generators (WTGs) and operations and maintenance (O&M) services.

Revenue from the WTG segment rose by 72.1%, reaching Rs 15.1 bn in Q2, compared to Rs 8.8 bn in the same period last year. This growth is driven by strong execution and an increase in new orders.

Revenue from Suzlon's O&M services grew by 17.7%, amounting to Rs 5.7 bn in the quarter, up from Rs 4.8 bn a year earlier.

What Next?

Suzlon Energy's future strategy focuses on expanding its capacity and maintaining a strong presence in India's renewable energy landscape. The company plans to increase its manufacturing capacity to 4.5 GW annually by the end of FY25, enabling it to meet growing demand.

Suzlon's strategic acquisition of Renom has enhanced its fleet and allows it to diversify into multi-brand O&M services, strengthening its competitive edge.

The company foresees significant growth in India's renewable energy demand, projecting installations of around 5 GW for FY25, which could increase to 6-7 GW in FY26, and potentially reach 9-10 GW annually.

Suzlon's well-established end-to-end solutions for wind energy, supported by an integrated supply chain, place it in a favorable position to capitalize on this projected demand.

In the long term, Suzlon intends to sustain growth through innovation and operational efficiency. The company is committed to investing in technology, workforce, and supply chain improvements to enhance profitability.

Additionally, Suzlon is exploring adjacent growth opportunities to increase stakeholder value, leveraging its core expertise in renewable energy.

For a detailed analysis of Suzlon, watch the video below in which Co-head of Research at Equitymaster, Rahul Shah, analyses the company.

How Suzlon Energy Shares have Performed Recently

In the past six months, shares of the company have rallied 39.7% and it in past year it gave returns of 41%.

On a year-to-date basis, Suzlon Energy has surged over 41.5%, while in the past month, shares are down 26.4%.

The company touched its 52-week high of Rs 86 on 12 September 2024 and its 52-week low of Rs 33.8 on 21 December 2023.

About Suzlon Energy

Suzlon is a renewable energy solutions provider.

The company is involved in the business of manufacturing, project execution and operation and maintenance of wind turbine generators and sale of related components.

The company's client portfolio includes power utilities and electricity producers in both the private and public sectors.

To know more, check out Suzlon's financial factsheet and quarterly results.

You can compare Suzlon Energy with its peers:

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