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UBS Investment Research
Suzlon Energy
Q3 FY11: weak performance continued
Q3 FY11—net loss of Rs1.9bn on a recurring basis
Suzlon Energy’s (Suzlon) Q3 FY11 results are not comparable with Q3 FY10. In
the previous period Hansen was consolidated, while this year it is treated as an
associate because of a stake sale in November 2009. In Q3 FY11, Suzlon reported
consolidated net sales of Rs44.94bn, a decline of 20% YoY, and EBITDA of
Rs1.82bn. On a reported basis, the net loss is Rs2.54bn and adjusted for forex
gains, the recurring net loss is Rs1.9bn. The results are disappointing, in our view.
Good order inflow from domestic markets
Suzlon recorded significant momentum in order inflows in India (1,150MW of new
domestic orders). Its current order book is 2,608MW (1,654MW from India and
954MW international). However, we continue to wait for international order
inflows to turn around. The company expects reasonable growth in the North
America market in 2011. We believe international orders will be the key for the
stock.
Conference call on 7 February 4:30pm IST
Suzlon has organised an investor conference call for Monday 7 February 2011 at
16:30 IST to discuss the results. We expect to receive more details on the
company’s business performance during the call. Overall, we continue to believe
that FY11 will remain a challenging year for Suzlon.
Valuation: Sell rating with a price target of Rs50.00
Our DCF-based price target of Rs50.00 is based on: 1) intermediate growth of
10%, 2) a long-term growth rate of 5%, 3) WACC of 12.4%. We have a Sell rating
on the stock due to the low visibility for revenue and lack of near-term catalysts.
Q3 FY11—net loss of Rs1.9bn
For Q3 FY11, Suzlon reported consolidated net sales of Rs44.94bn, a decline
of 20% YoY, and EBITDA of Rs1.82bn.
On a reported basis, the net loss is Rs2.54bn and adjusted for forex gains, the
recurring net loss is Rs1.9bn.
9M FY11 results
For 9M FY11, Suzlon reported consolidated net sales of Rs107.18bn, a
decline of 27% YoY, and negative EBITDA of Rs2.16bn.
On a reported basis, the net loss is Rs15.35bn and adjusted for exceptional
items, the recurring net loss is Rs13.0bn.
Suzlon Energy
Suzlon Energy is the world's fifth largest wind turbine manufacturer and the
largest in Asia. Suzlon offers integrated wind power solutions, including
consultancy, manufacturing, project execution, and operations and maintenance
services. Suzlon has made two acquisitions in Europe: 1) gear box manufacturer
Hansen Technologies in 2006; and 2) turbine manufacturer Repower in 2007.
Statement of Risk
The key risks are liquidity and cash flows for Suzlon, and a later-than-expected
recovery in wind orders globally. The key risk to our Sell rating is a faster-thanexpected
pick-up in new orders.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Suzlon Energy
Q3 FY11: weak performance continued
Q3 FY11—net loss of Rs1.9bn on a recurring basis
Suzlon Energy’s (Suzlon) Q3 FY11 results are not comparable with Q3 FY10. In
the previous period Hansen was consolidated, while this year it is treated as an
associate because of a stake sale in November 2009. In Q3 FY11, Suzlon reported
consolidated net sales of Rs44.94bn, a decline of 20% YoY, and EBITDA of
Rs1.82bn. On a reported basis, the net loss is Rs2.54bn and adjusted for forex
gains, the recurring net loss is Rs1.9bn. The results are disappointing, in our view.
Good order inflow from domestic markets
Suzlon recorded significant momentum in order inflows in India (1,150MW of new
domestic orders). Its current order book is 2,608MW (1,654MW from India and
954MW international). However, we continue to wait for international order
inflows to turn around. The company expects reasonable growth in the North
America market in 2011. We believe international orders will be the key for the
stock.
Conference call on 7 February 4:30pm IST
Suzlon has organised an investor conference call for Monday 7 February 2011 at
16:30 IST to discuss the results. We expect to receive more details on the
company’s business performance during the call. Overall, we continue to believe
that FY11 will remain a challenging year for Suzlon.
Valuation: Sell rating with a price target of Rs50.00
Our DCF-based price target of Rs50.00 is based on: 1) intermediate growth of
10%, 2) a long-term growth rate of 5%, 3) WACC of 12.4%. We have a Sell rating
on the stock due to the low visibility for revenue and lack of near-term catalysts.
Q3 FY11—net loss of Rs1.9bn
For Q3 FY11, Suzlon reported consolidated net sales of Rs44.94bn, a decline
of 20% YoY, and EBITDA of Rs1.82bn.
On a reported basis, the net loss is Rs2.54bn and adjusted for forex gains, the
recurring net loss is Rs1.9bn.
9M FY11 results
For 9M FY11, Suzlon reported consolidated net sales of Rs107.18bn, a
decline of 27% YoY, and negative EBITDA of Rs2.16bn.
On a reported basis, the net loss is Rs15.35bn and adjusted for exceptional
items, the recurring net loss is Rs13.0bn.
Suzlon Energy
Suzlon Energy is the world's fifth largest wind turbine manufacturer and the
largest in Asia. Suzlon offers integrated wind power solutions, including
consultancy, manufacturing, project execution, and operations and maintenance
services. Suzlon has made two acquisitions in Europe: 1) gear box manufacturer
Hansen Technologies in 2006; and 2) turbine manufacturer Repower in 2007.
Statement of Risk
The key risks are liquidity and cash flows for Suzlon, and a later-than-expected
recovery in wind orders globally. The key risk to our Sell rating is a faster-thanexpected
pick-up in new orders.
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