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Suzlon shares could test ₹60 levels as Morgan Stanley launches ‘overweight’ rating

Brokerage firm Morgan Stanley initiated coverage on wind turbine producer Suzlon Energy Ltd., with an “overweight” rating and a price target of ₹58.5. Morgan Stanley’s price target implies a potential upside of 22% from Friday’s closing levels.

Suzlon shares are up 24% so far in 2024, but have gained more than 300% in the past 12 months.

Morgan Stanley wrote in its note that Suzlon 2.0 is well positioned to benefit from India’s energy transition. It is a much stronger company after the deleveraging process and much leaner after reducing its fixed operating costs.

Suzlon transformed itself into a debt-free company after raising funds through various methods, including a QIP and a rights issue. At the end of the March quarter, the company had a net cash balance of ₹1,100 crore on its books.

The brokerage wrote that the market has yet to fully appreciate Suzlon’s growth potential, as it expects wind orders worth 32 GW, or nearly $31 billion, over the course of of the next five years.

Suzlon’s earnings are expected to grow at a compound annual growth rate (CAGR) of 57% over the next three years between fiscal 2024 and 2027, according to the Morgan Stanley note.

This is the second initiation on Suzlon Energy in the past week. Previously, Nuvama had initiated coverage on the stock with a ‘buy’ recommendation and a price target of ₹53.

Nuvama believes that Suzlon’s growth visibility is supported by industry tailwinds, technological leadership, high margins in operations and maintenance (O&M) services and balance sheet strength.

Suzlon management, in interaction with CNBC-TV18 had stressed that it was in negotiations with customers for a significant order book. Over the past two weeks, the company has won three orders. It won its first order from Juniper Green Energy on Friday, the second from the Aditya Birla Group and the third from Oyster Green Hybrid.

Suzlon also saw its weighting increase in MSCI indexes, leading to capital inflows worth $14 million on Friday.

Shares of Suzlon ended in an upper circuit of ₹47.65 on Friday.

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