Visit http://indiaer.blogspot.com/ for complete details �� ��
Suzlon Energy Ltd Underweight
SUZL.BO, SUEL IN
Domestic markets buoyant in 2Q; bottom line still negative
• EBITDA positive in 2Q. Contrary to our expectations, Suzlon posted a
positive consolidated EBITDA of Rs.883M driven by higher than
expected sales (361MW vs. JPMe of 250MW in Suzlon's wind business
and Rs.15.6B for REPower vs. JPMe of Rs.12B). However, the
company still posted an adjusted loss of Rs3.8B compared to our
estimate of Rs.4B on account of higher than expected capital costs and
taxes.
• Domestic market drives order flows and execution. ~90% (892MW
vs. 235MW in 1HFY10) of order flows and 75% of sales (429MW vs.
181MW in 1HFY10) in 1HFY11 came from India, the only silver lining
for Suzlon’s wind business. International order flows continue to be
weak, with only China reporting 100MW of new orders in 1H. We
model ~850MW of domestic sales in FY11. With 429MW of sales
already achieved in 1H, the company seems to be on track to achieve our
estimate. Continuance of strong execution poses an upside risk to our
overall estimate of 1,550MW. Management expects the size of the
Indian WTG market to grow to 2.0-2.2GW from 1.6GW in FY10, and to
2.6-3.0GW in FY12.
• Paucity of order flows persists in international markets like the US
and EU, with a recovery not in sight thru FY11. As of 29th Oct, the OB
stood at 1,550MW which includes 693MW of domestic orders and
857MW of international orders. Despite the international order book
having visibility thru FY11 based on our sales est. of 700MW, Suzlon
has managed to execute only 139MW thru 1H (vs. 219MW in 1HFY10),
including 108MW from China, with clients deferring deliveries across
other regions. Moreover, the 1,550MW order book provides revenue
visibility thru FY11 based on our estimate of delivery volumes of
982MW in the next six months. However, we believe with no large
international orders coming through, our FY12 estimate of 2,050MW is
at risk.
No comments:
Post a Comment