Suzlon Energy Shares up 8% Following Newly Released MNRE Draft; Motilal Oswal Remains Optimistic

Motilal Oswal remains bullish on Suzlon Energy. The brokerage firm believes that the energy giant will increase its market share under the new framework announced by the Ministry of New and Renewable Energy (MNRE) in the near to medium term.

The Ministry of New and Renewable Energy (MNRE) has released a draft notification proposing amendments to the procedure for inclusion or updation of wind turbine models in the Revised List of Models and Manufacturers (RLMM). The draft mandates local sourcing of key components, aimed at boosting the prospects of Indian original equipment manufacturers (OEMs) and strengthening domestic manufacturing capabilities.

The draft also addresses concerns relating to heightened competition from Chinese OEMs and margin pressure, Motilal said. The brokerage added that Suzlon is a market leader and is well-positioned to benefit from it.

The revised framework lays emphasis on domestic manufacturing; enhanced technical disclosures; certification & collaboration details; data localization & cybersecurity; R&D requirement among many. However, it’s unclear whether these provisions would be applicable to the existing RLMM list besides new inclusions, the brokerage firm said.

On April 21, Monday, shares of Suzlon Energy were up by 8.35% to ₹59.70 to clock a market capitalisation of ₹81,500 crore.

“The type certificate of the wind turbine model shall mandatorily include Blade, Tower, Gearbox and Generator manufacturing facility in India and these components shall only be sourced from such facilities,” the draft said. An exemption will also be allowed for the import of these components - for up to 200 MW or one year, whichever is earlier.

Mandatory domestic sourcing largely removes the pricing advantage enjoyed by Chinese companies, which were until now importing key components from China, said Motilal Oswal. “We believe this limits participation in the wind turbine manufacturing space to long-term players that are committed to investing capital and time,” it added with a 'buy' rating and a target price of ₹75 on Suzlon Energy.