Suzlon Energy Rallies On Renom Acquisition; Shares Rise 292% In A Year, More Steam Left?

Shares of Suzlon Energy hit a 5 per cent upper circuit to scale a multi-year high of Rs 73.05 on NSE. The recent surge comes after the renewable energy player signed definitive agreements for acquisition of 76 per cent stake in Renom Energy Services from the Sanjay Ghodawat Group (SGG).

Renom is the largest Multi Brand Operations and Maintenance service (MBOMS) 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.

It operates in seven windy states and has experience maintaining turbines from 14 different manufacturers. The acquisition will occur in two stages: an immediate purchase of 51 per cent for Rs 400 crore and an additional 25 per cent within 18 months for Rs 260 crore.

Suzlon Energy will not merge Renom with itself and it will continue as an independently managed company, said Suzlon Group CEO JP Chalasani in an interaction with CNBC-TV18. The Operations & Maintenance (OMS) business will provide stability to Suzlon’s financials, he added.

In Q1 FY25, Suzlon also reported a 50 per cent increase in revenue from operations, reaching Rs 2,016 crore compared to Rs 1,348 crore in the same period last year. The company’s EBITDA rose 86 per cent to Rs 370 crore, with an improved EBITDA margin of 18.4 per cent, up from 14.8 per cent a year earlier.

The stock also hit a 5 per cent upper circuit in today’s trade and has reached the upper circuit 7 times in the past 13 trading sessions since the results announcement.

With Thursday’s move, Suzlon’s market capitalisation is nearing the mark of Rs 1 lakh crore, currently at Rs 99,500 crore.

Morgan Stanley has issued an overweight call on Suzlon, with a target price of Rs 73.4 per share. According to the international brokerage, the acquisition of Renom Energy Services marks a strategic entry into the multi-brand Operations and Maintenance Services (OMS) sector.

The implied valuation of 4x price to sales is considered cheaper than its listed peer, MS said in its note.

JM Financial has maintained its ‘buy’ rating on Suzlon stock. The company is likely to leverage Renom for capturing 32GW non-Suzlon OMS market (10GW immediate opportunity) which is growing with India’s target of 100 GW wind energy capacity by FY30.

The acquisition will expose Suzlon to new sites, potentially benefiting from emerging repowering opportunities, it noted.

“We believe the acquisition represents a strategic move by Suzlon, enhancing its capabilities, expanding its market presence, and creating value,” the brokerage said.

This year, the stock has surged approximately 88 per cent, significantly outpacing the Nifty 50, which gained over 11 per cent. Over the past year, the stock has delivered exceptional returns of around 292 per cent, nearly quadrupling investors’ capital.

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