Release Date: May 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Suzlon Energy Ltd (BOM:532667, Financial) reported its largest-ever order book of 3.3 gigawatts, providing strong revenue visibility.
- The company registered more than 75% year-on-year growth in installations, reaching 882 megawatts in FY24.
- Suzlon Energy Ltd (BOM:532667) achieved a 24% growth in EBITDA and a 428% increase in PAT before exceptional items compared to FY23.
- The company has a strong balance sheet with a consolidated net worth of INR3,920 crores and a net cash position of INR1,148 crores as of March '24.
- Suzlon Energy Ltd (BOM:532667) has a well-diversified and healthy order book, including significant contributions from the C&I market.
Negative Points
- The company faces challenges with commodity price increases and logistical issues, which may impact future margins.
- There are ongoing land and grid connectivity challenges that could affect project timelines and capacity additions.
- Interest expenses were higher than other income due to one-time processing fees and increased issuance of LCs and bank guarantees.
- The transition to the new S144 model and supplier capacity build-up may result in cost pressures for FY25.
- The company acknowledges that achieving the government's target of 100 gigawatts of wind capacity by 2030 may be challenging given current execution rates.
Q & A Highlights
Q: Could you spell out the contribution margin in FY24 for WTG and the fixed expenses in the WTG business for FY24?
A: The contribution margin for FY24 in the WTG division is about 19.5%, whereas the fixed expenses are close to about INR600 crores. Our breakeven point remains pretty much unchanged.
Q: Is the 19.5% contribution margin sustainable?
A: There are factors like hardening commodity prices and logistical challenges that might increase costs. We are moving to a completely S144 model, which may also pressure COGS. We aim to maintain mid-teens guidance, but sustaining 19.5% is uncertain. We should be in the 15% to 20% region.
Q: Given your net cash at the end of the fourth quarter at INR11.5 billion, why is the interest expense higher than the other income?
A: The interest expense includes a one-time processing fee of about INR11 crores for a working capital tie-up with REC Limited. Additionally, LCs and bank guarantees issued to customers and vendors increased the interest cost.
Q: For your EPC order book, how many footprints for installing wind turbines do you have in control where land and evacuation are in place?
A: Our EPC order book is one-third of the total. Grid connectivity is in the client's scope, and land remains a challenge. We are working to ease these issues, especially under developmental routes in other states.
Q: Can you give us a broad idea of expected wind installations for FY25 and Suzlon's market share?
A: We expect wind installations to be between 4.5 to 5 gigawatts in FY25. Suzlon's market share has been in the range of 25% to 30%, and we aim to maintain this.
Q: What is the overall TAM for wind projects in the next two to three years?
A: The market size could be around 8 to 10 gigawatts of pure wind projects, including FDRE and RTC. The C&I market also adds to this. We expect the country's wind capacity to reach about 5 gigawatts this year, 7 to 8 gigawatts in FY26, and 9 to 10 gigawatts by FY27.
Q: What are the challenges Suzlon faces in the upcoming year?
A: Challenges include connectivity, land acquisition, and project readiness. We have resolved major issues like debt and working capital. We are also focusing on ramping up our new 3-megawatt turbine model.
Q: What is your guidance on deliveries in FY25?
A: We do not provide specific guidance. However, we believe installations on the ground will be around 5 gigawatts, and Suzlon aims to maintain its historical market share.
Q: What is the margin difference between EPC and non-EPC orders?
A: We do not provide a split of margin differences between EPC and non-EPC orders. We only give consolidated WTG division margins.
Q: Are there any challenges in transmission capacity creation in India?
A: The main challenge is the timeline for transmission capacity coming online. The government is planning CTU grids in high wind potential areas and considering reserving capacity for wind.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
