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Suzlon Energy Ltd.
Power into profits post 7 Qtrs;
Raise PO; contrarian Buy
First rec profit after seven Qtr losses; PO raised; Buy
Suzlon turned the corner in a quarter where losses at Vestas doubled, with its first
rec PAT at Rs1.6bn in 4Q11 (vs loss Rs2bn in 4Q10). This was led by a) rebound
in profitable India volume +15%YoY, b) a strong 4Q at REpower (sales +68%YoY
and 3.2x EBIT) and c) improved turbine availability (>97%) and cost cutting.
Backlog doubled on +134%YoY inflows and net debt cut to 1.36x vs peak 1.7x in
1Q11. We up our PO to Rs75 (Rs70) on roll-forward. Reiterate our Buy on Suzlon,
on a structural turnaround. Risks to our non-consensus Buy call are delivery pushback,
currency and execution.
India MW +15% & REpower sales +68%; On track for FY12 profits
Suzlon’s back-to-basics strategy to survive weakness in US market has paid off,
with FY11 inflows +134%yoy, led by 2.7x growth in India orders. While its
International volume fell 73%YoY, Suzlon’s domestic MW grew 15%YoY in 4Q.
REpower had strong 4Q11 on good execution and consolidation of China and
Portugal JVs (sales +68%YoY) led EBIT 3.2x. Profit turnaround was slower paced
vs MLe as SUEL lost ~160MW (33% of 4Q) to 1Q. Reported PAT was 4.3bn.
Balance sheet improved QoQ (4Q net debt / equity 1.36x v/s 1.5x). Co guided for
FY12 sales at Rs240-260bn vs MLe of Rs235bn and EBIT margin 7-8% vs MLe of
7.8% margin inline with BoFAMLe.
Three catalysts to Buy Suzlon – A turnaround story
25% CAGR till FY13E in the Indian wind markets on higher feed-in tariffs (offset
rising interest cost/low wind sites) and new regulation leading to entry of
IPPs. Its back-to-basics strategy has paid-off, with FY11 orders up 2.7x in
India to 2.3GW.
33% PAT CAGR in REPower on shift in a) product-mix to high margin
offshore wind and b) production of its largest selling 2MW turbine to low cost
(India/China) and
Recovery of Rs10bn (24% of debtors) in 2HFY12 (Edison), to fund growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Suzlon Energy Ltd.
Power into profits post 7 Qtrs;
Raise PO; contrarian Buy
First rec profit after seven Qtr losses; PO raised; Buy
Suzlon turned the corner in a quarter where losses at Vestas doubled, with its first
rec PAT at Rs1.6bn in 4Q11 (vs loss Rs2bn in 4Q10). This was led by a) rebound
in profitable India volume +15%YoY, b) a strong 4Q at REpower (sales +68%YoY
and 3.2x EBIT) and c) improved turbine availability (>97%) and cost cutting.
Backlog doubled on +134%YoY inflows and net debt cut to 1.36x vs peak 1.7x in
1Q11. We up our PO to Rs75 (Rs70) on roll-forward. Reiterate our Buy on Suzlon,
on a structural turnaround. Risks to our non-consensus Buy call are delivery pushback,
currency and execution.
India MW +15% & REpower sales +68%; On track for FY12 profits
Suzlon’s back-to-basics strategy to survive weakness in US market has paid off,
with FY11 inflows +134%yoy, led by 2.7x growth in India orders. While its
International volume fell 73%YoY, Suzlon’s domestic MW grew 15%YoY in 4Q.
REpower had strong 4Q11 on good execution and consolidation of China and
Portugal JVs (sales +68%YoY) led EBIT 3.2x. Profit turnaround was slower paced
vs MLe as SUEL lost ~160MW (33% of 4Q) to 1Q. Reported PAT was 4.3bn.
Balance sheet improved QoQ (4Q net debt / equity 1.36x v/s 1.5x). Co guided for
FY12 sales at Rs240-260bn vs MLe of Rs235bn and EBIT margin 7-8% vs MLe of
7.8% margin inline with BoFAMLe.
Three catalysts to Buy Suzlon – A turnaround story
25% CAGR till FY13E in the Indian wind markets on higher feed-in tariffs (offset
rising interest cost/low wind sites) and new regulation leading to entry of
IPPs. Its back-to-basics strategy has paid-off, with FY11 orders up 2.7x in
India to 2.3GW.
33% PAT CAGR in REPower on shift in a) product-mix to high margin
offshore wind and b) production of its largest selling 2MW turbine to low cost
(India/China) and
Recovery of Rs10bn (24% of debtors) in 2HFY12 (Edison), to fund growth.
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