Suzlon Energy's Q2 FY27 performance has exposed a growing gap between its strong order execution and profitability. Wind turbine deliveries surged 26% year-on-year (YoY) to 710 MW and revenue rose at a similar pace, but EBITDA remained flat, operating margins contracted sharply and first-half operating cash flow turned negative. UBS has cut its earnings estimates and lowered its price target, but continues to see considerable upside in the stock.
The brokerage has maintained its ‘Buy' rating on Suzlon Energy while cutting its target price to Rs 58 from Rs 66, implying an upside of around 58%. UBS has also lowered its FY27 EBITDA margin guidance to 15-16% from 17%, highlighting the pressure on profitability despite strong delivery momentum.
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Suzlon Energy Q2 Results: Revenue Grows 26%, EBITDA Remains Flat
Suzlon Energy reported consolidated revenue of Rs 4,869 crore in Q2 FY27, up 26% from Rs 3,866 crore in the corresponding quarter last year.
However, EBITDA remained almost unchanged at Rs 720 crore against Rs 721 crore a year earlier. Consequently, the EBITDA margin contracted 386 basis points to 14.8% from 18.6%, indicating that higher deliveries and revenue have not yet translated into improved operating profitability.
READ | Suzlon Energy Q2: Net Profit Declines 69% Due To Last Year's Deferred Tax Impact, Revenue Grows 26%
The company's reported consolidated net profit declined 69.2% year-on-year to Rs 394 crore. However, this comparison is distorted by the year-ago quarter, when Suzlon recognised a deferred tax asset of Rs 891 crore. Excluding that impact, net profit increased 1.3% from Rs 389 crore in Q2 FY26.
Profit before tax declined to Rs 518 crore from Rs 563 crore.
Why Has UBS Cut Its Suzlon Energy Target Price?
UBS has reduced its target price to Rs 58 from Rs 66, while retaining its Buy recommendation. The brokerage has cut its FY27, FY28 and FY29 earnings-per-share estimates by 10%, 11% and 9%, respectively.
The revision comes amid weaker-than-expected margin performance and a reduction in the company's FY27 EBITDA margin guidance to 15-16% from 17%.
Another concern is cash generation. Suzlon's operating cash flow turned negative at Rs 2 billion during the first half of FY27, according to UBS.
Despite these near-term pressures, the brokerage has retained its long-term outlook for the company, including its FY31 targets of approximately 40% market share and annual sales of around 10 GW.
Suzlon's 6 GW Order Book Provides 18-Month Visibility
There are signs of continued strength in Suzlon's execution pipeline. The company reported record India deliveries of 710 MW during the September quarter, compared with 565 MW a year earlier. It also commissioned 454 MW during the quarter.
Its order book stood at around 6 GW, providing approximately 18 months of delivery visibility. Order intake exceeded 1.5 GW in the first half of FY27, with public sector undertakings and commercial and industrial customers accounting for 78% of the order book.
Suzlon's financial position also showed some improvement. Consolidated net worth crossed Rs 10,000 crore to reach Rs 10,277 crore, while its net cash position stood at Rs 2,048 crore. CRISIL upgraded the company's long-term credit rating to AA-/Stable.
Suzlon Energy Share Price: Stock Down 34% In Six Months
Suzlon Energy shares ended the previous trading session 1.45% lower. The stock has declined 3.5% over five trading sessions and 6.7% over the past month.
The correction has been sharper over longer periods. Suzlon shares have fallen 33.8% in six months, 37% over one year and around 30% year-to-date. The stock is also down approximately 32% over five years.
The contrast between the company's delivery growth and its share-price performance puts the focus on whether Suzlon can convert its large order book into stronger margins and cash generation.
The key monitorables for investors now are the recovery in EBITDA margins, operating cash flow and execution of the 6 GW order book. UBS continues to see long-term potential, but its lower target price and earnings estimates underline the near-term challenges.
READ | Suzlon Q2 Margin Squeeze: What's Eating Into Its Turbine Profits
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