Real Estate Pune
Suzlon's One Earth Property Sale to Bolster Core Business, ICICI Securities Raises Target Price
By GeoSquare News Desk · Published 2024-09-06
Suzlon Energy has entered into an agreement to sell and lease back its prime real estate in Pune over the next 5 years at Rs 440 crore. This move is expected to strengthen the company's core wind energy operations, aligning with its non-core asset strategy and debt restructuring plans.
ICICI Securities, a domestic brokerage firm, has raised Suzlon Energy's target price to Rs 80 from the earlier Rs 70, while retaining its 'add' rating. The capital generated from the sale will be utilized to increase execution and capability of Suzlon to gather incremental orders.
Suzlon had committed to sell non-core assets to lenders in April 2022 at the time of debt restructuring. Despite its robust balance sheet on the back of strong profitability and a fundraiser through QIP, it has decided to sell the asset. This step is likely to help the company in securing cash and improving net worth for executing the core wind energy business.
Earlier, Suzlon had also acquired a 74% stake in the largest 3rd party O&M business of Renom Energy Services at Rs 660 crore. It is looking to scale up the O&M business through capabilities. Renom is the largest operations and maintenance service provider in the country with assets of 1,782 MW in wind, 148 MW in solar, and 572 MW in BOP under maintenance across customer segments.
Suzlon is now back in shape after a tumultuous period over the last decade. Suzlon, over the past three years, has reduced its debt from Rs 12,000 crore in FY20 through various debt to equity conversions. Moreover, major positive changes in regulatory policy and eventually on the business front bode well for the wind industry.
Outlook for the wind industry is positive over the medium to long term, as 10GW of wind opportunity is likely to be floated over FY23-27E. Also, given the increasing complexity of RE power projects (from plain vanilla solar or wind to Hybrid, RTC and now FDRE), we believe wind may play a crucial role in RE generation going ahead.
The order book as of June ‘24 stood at 3.8GW which is 5x FY24 WTG volume of 710MW. Thus, owing to strong order backlog and healthy growth in WTG volumes, we remain positive on the stock and maintain our FY25/26E financial estimates.
The shares of Suzlon have surged by 216% in the last 1 year while giving 95% returns in the current calendar year so far.
About ICICI Securities ICICI Securities is a leading Indian financial services company that offers a wide range of financial services including brokerage, investment banking, and wealth management.
About Suzlon Energy Suzlon Energy is a leading Indian wind turbine manufacturer and renewable energy solutions provider.
About Renom Energy Services Renom Energy Services is a leading operations and maintenance service provider in the renewable energy sector in India.
Keywords Suzlon Energy, ICICI Securities, One Earth Property, wind energy, renewable energy, debt restructuring, QIP, Renom Energy Services