Morgan Stanley has initiated a positive outlook on Suzlon Energy, maintaining an 'Overweight' rating, primarily in response to the Ministry of New and Renewable Energy guidelines for the localisation of wind manufacturing. The broking's stance is bullish, with a target price of Rs 77 based on the potential for domestic original equipment manufacturers, or OEMs, with Suzlon being a key player.
The new MNRE regulations are seen as a catalyst, set to improve the competition and pricing for local manufacturers by mandating the use of domestically sourced components.
MNRE Regulations to Drive Local Market Share
The key takeaway is the view that new regulations will create a more favourable environment for domestic OEMs like Suzlon. The MNRE guidelines require manufacturers to specify vendors and sources for critical components such as blades, towers, generators, and gearboxes. Further, the ministry will inspect component manufacturing units and plans to release an ALMM, or Approved List of Models and Manufacturers, for wind turbine components.
The improved pricing level is also a factor, as developers who previously relied on cheaper imports, particularly from China, will now have to source locally.
"The regulations mandate the localisation of data centres, control systems, and R&D for wind turbines, further strengthening the domestic ecosystem. The existing wind contracts that have already been bid out are exempted if commissioned within the next three years. New wind manufacturers or new models are limited to 800 MW for two years from the date of enlistment," according to the brokerage.
The brokerage sees the mandates as a positive for Suzlon, helping the company benefit from increased domestic market share and better pricing.
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