Leading domestic brokerage firm ICICI Securities has elevated its rating on wind energy stocks Suzlon Energy and Inox Wind to 'Buy', citing the recent correction in their share prices as a favorable buying opportunity. The firm maintains a target price of Rs 48 for Suzlon Energy and Rs 675 for Inox Wind.

A Transformative Reversal for Suzlon?

According to ICICI Securities' analysis, Suzlon Energy has undergone a remarkable transformation after enduring a challenging decade. Over the past three years, the company has significantly reduced its debt burden, which stood at a staggering Rs 12,000 crore in FY20, primarily through debt-to-equity conversions.

This debt reduction strategy has propelled Suzlon Energy into a positive net cash position, with a cash reserve of Rs 700 crore as of December 2023. The company's successful equity raise of Rs 2,000 crore in Q2 FY24, focused on further debt reduction, has strengthened its financial status.

Policy Shifts and Growing Demand Fuels Suzlon Resurgence

The brokerage firm notes that supportive government policies and evolving industry dynamics bode well for the wind energy sector. The government's commitment to auction at least 10 GW of wind capacity yearly, along with growing demand from businesses for reliable power, positions Suzlon favorably as the wind turbine market leader.

As renewable projects become more sophisticated, integrating hybrid systems, round-the-clock operations, and firm day-ahead capabilities, wind power is expected to remain vital in the renewable generation mix. Suzlon has already secured robust new orders exceeding 3.1 GW this fiscal year which is a notable increase compared to less than 400 MW in the previous fiscal ( FY23).

Inox Wind's Deleveraging and Order Book Revival  

ICICI Securities highlighted Inox Wind's remarkable turnaround after experiencing a downturn in the wind sector, where its debt levels had escalated. However, the company has been proactively reducing its debt, and projections indicate that its net debt will decline to Rs 470 crore by the end of FY24. 

Inox Wind has witnessed a sharp upswing in new orders, with a substantial 1,829 MW order inflow in Q3 FY24. This surge is primarily driven by a 1,500 MW order from CESC, slated for execution over the next 3-4 years. This sizeable order book has improved visibility for Inox Wind's execution growth in the near future.

Also, the company is poised to profit from a promising pipeline of upcoming orders, fueled by heightened activity in awarding hybrid and wind power projects during the current fiscal year. These developments underscore Inox Wind's resurgence and position it for sustained growth in the dynamic wind energy landscape.

Should You Consider Buying In 2024?

The wind energy sector is poised for notable growth, driven by supportive government policies and regulations. The commitment to auctioning a minimum of 10 GW of wind capacity yearly, combined with hyped demand from commercial and industrial players for reliable power, blends quite well for the industry's prospects. 

As renewable projects become more refined, integrating hybrid models, round-the-clock operations and the firm's day-ahead solutions, wind power is expected to assume an important role in the overall renewable generation landscape. Amid recent stock dips and an optimistic industry outlook, ICICI Securities deems Suzlon Energy and Inox Wind as attractive buying opportunities, leveraging their market leadership and robust capabilities.