Suzlon Energy expects margin contraction as core business grows, banks on H2 execution

In a post-earnings interaction with CNBC-TV18, Suzlon Group CFO Himanshu Mody explained that because the WTG business is the low-margin business for Suzlon Energy, currently in the high-single-digits, while the OMS business typically sees margins in the 40% range.

The Suzlon Group CFO expects consolidated EBITDA margin to drop to early teen levels as WTG deliveries increase. For the current quarter, margins saw a marginal dip from last year to 13.97% from 15.74%.

Suzlon Energy is banking on stronger execution in the second half of the current financial year to achieve deliveries between 1.3 GW – 1.5 GW for the full year. The management also said that its WTG (Wind Turbine Generation) business, which is the bigger business among the two, will grow faster than the Operations & Maintenance (OMS) business.

Suzlon’s Deliveries during the quarter stood at 256 MW, which was marginally below the 274 MW it delivered during the June quarter but nearly double of the 132 MW it delivered during the same quarter last year. For the first half of the current financial year, deliveries stood at 530 MW.

Mody mentioned that Suzlon completes 35% of its full-year deliveries in the first half, while the remaining takes place in the second half of the year.

In August this year, Suzlon had acquired a 76% stake in Renom Energy Services from the Sanjay Ghodawat Group. Renom Energy provides comprehensive Operations and Maintenance services of all technologies and capacity of wind turbines and solar assets under a single roof. It has about ~2.5 GW of assets under management across India.

Mody said that Renom had a contribution of 26 days to Suzlon’s financial performance and that the December quarter will be a first full quarter for Renom. He further added that Renom continues to operate as a separate entity with a separate management and that there are currently no intentions to integrate it into Suzlon.

Brokerage firm Nuvama has a “hold” rating on Suzlon with a price target of ₹67.

The brokerage said that the stock is already factoring in the uptick in operating income and profits at the current valuation of 45 times financial year 2027 estimated Earnings Per Share of the WTG business.

Shares of Suzlon are set to open with gains of close to 3% at ₹72.75.