Analyst Rajesh Palviya, Senior Vice President – Technical and Derivatives Research at Axis Securities said the stock made higher tops and higher bottoms on technical charts, displaying a strong uptrend. On the quarterly chart, the stock has confirmed a rounding bottom formation breakout at levels around 17 on a closing basis, which signals positive bias, Palviya said.
The volume action seen on Monday was not an isolated case as the stock has witnessed sustained volume growth in the past couple of years, which indicates increased participation in the rally. Trendlyne data suggests that the stock is trading above its 20-day, 50-day, 100-day and 200-day Simple Moving Averages (SMA).
“The stock is well placed above its SMAs and these averages are also inching up along with the price rise, which reconfirms a bullish trend. The weekly, monthly and quarterly strength indicator RSI is in favourable terrain and quoting above the 50 mark, indicating sustained strength. The quarterly band bollinger also indicates increased momentum,” Axis Securities’ analyst reiterated, calling Suzlon Energy a momentum pick.
He sees a crucial support zone between Rs 18 and Rs 12 with an upside up to Rs 30-32 which translates to over 30% gains over Monday’s closing price.
Investors with a near-term view should watch out for volatility in Suzlon Energy as the stock has traded with a 1-year beta of 1.7 exhibiting bouts of sharp moves. Also, Monday’s movement in stock took momentum indicators RSI and MFI into the overbought zone. While the day’s RSI stood at 75.5, the MFI stood at 89, taking the stock into a strong overbought zone.Fundamental View
Suzlon Energy reported a consolidated net profit of Rs 101 crore for the quarter ended June 2023. It was down 96% from Rs 2,433 crore reported in the corresponding quarter of last year. On a sequential basis, the net profit declined 64% from Rs 280 crore clocked in the preceding March quarter. Revenue from operations during the quarter also fell marginally to Rs 1,348 crore, compared with Rs 1,378 crore in the corresponding quarter last year. Revenues dropped 20% quarter-on-quarter.
Kranthi Bathini, Director-Equity Strategy at WealthMills Securities sees a slew of company-specific developments to have fundamentally triggered the price action in the stock. “The company has been reducing its debts and improving profitability. Moreover, a lot of emphasis is being given on alternative or green energy, especially wind energy and Suzlon is one of the key players in this space,” Bathini said. The recently concluded Qualified Institutional Placement (QIP) was also a high point for the stock in his opinion.
All these factors have turned out to be positive for Suzlon shares and generated buying interest among the investors.
A report by brokerage JM Financial also highlighted how the company was approaching its debt obligations. “Suzlon had to undergo a restructuring exercise on account of non-fulfillment of its debt obligations in the past (Rs 21,700/Rs 15,000/Rs 2,600 in FY15/20/23). However, during last year it refinanced its existing debt and converted its entire outstanding Optionally Convertible Debentures (OCDs) and Compulsorily Convertible Preference Shares (CCPS) to bring down the total debt,” JM report said adding that Suzlon has completed rights issue of Rs 1,200 crore and utilised Rs 900 to prepay its debt obligations.
The triggers for its growth are leading market share at 33%, manufacturing depth and technology superiority which is expected to aid its order book and enhance project execution, JM said. The domestic brokerage initiated coverage on the stock with a buy rating and a September 2024 target of Rs 30 per share based on a 25X September 2025E EPS.
However, Bathini sees legacy issues still weighing on the stock and hence recommended only those investors to buy who have a high risk appetite. It is a candidate for long-term investment and often moves from circuit to circuit, he said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)