Suzlon Energy Downgraded to 'Sell' by MarketsMOJO, Low ROE and Flat Financial Results

Suzlon Energy, a leading player in the renewable energy industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 8, 2024. This decision was based on several factors, including poor management efficiency with a low return on equity (ROE) of 6.38%. This signifies a low profitability per unit of shareholders' funds.
The company's financial results for September 2024 have also been flat, with its operating cash flow at its lowest at Rs 79.53 crore. Additionally, its interest expenses have grown by 25.85%, while its profit before tax has fallen by -15.8%. With a ROE of 21.9, Suzlon Energy is currently trading at a very expensive valuation with a price to book value of 18.8. However, it is currently trading at a discount compared to its average historical valuations.

On the positive side, the company has shown healthy long-term growth with its operating profit growing at an annual rate of 45.23%. However, the technical trend for the stock is currently sideways, indicating no clear price momentum. The stock has also underperformed since the downgrade, generating -6.49% returns since November 8, 2024.

One of the key factors to consider is the high institutional holdings at 30.7%. These investors have better capability and resources to analyze the fundamentals of companies compared to retail investors. Their stake in Suzlon Energy has also increased by 4.83% over the previous quarter.

Despite the recent downgrade, Suzlon Energy has consistently generated strong returns over the last three years, outperforming the BSE 500 index in each of the last three annual periods. With a market cap of Rs 90,475 crore, it is the second largest company in the renewable energy sector, constituting 28.87% of the entire industry. Its annual sales of Rs 7,881.65 crore also make up 28.06% of the industry.