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Suzlon Energy Ltd
Neutral
SUZL.BO, SUEL IN
Analyst meet high on promise -
• Management confident of meeting FY12 guidance. Suzlon has guided to
consol revenue of ~Rs240-260bn and EBIT margin of 7-8%. The group
expects to sell ~2.5GW of turbines in Suzlon wind business in FY12, with
~1.8GW in the domestic market. As per management current backlog
(2.23GW) provides sales visibility for 1.5GW (0.8GW domestic) and they
expect to bag another 1GW of domestic orders for supply in FY12.
Assuming sales realization of ~Rs60mn/MW for wind business, the implied
Repower sales guidance for FY12 is ~Rs90-100bn (vs. our est. of Rs88bn).
We have retained our est. of 2.25GW turbine sales. We await pick-up in
order inflows deliverable in FY12 to become more positive. Our FY12
consol revenue est. is Rs227bn and EBIT margin estimate of 6.5%.
• Positive highlights on operations and growth outlook: (1) Management
emphasized that Suzlon's turbine availability levels exceed 97% (quality
issues are behind), and would require lower guarantee costs (2) Domestic
market is expected to be ~3.5GW in FY12 and may reach ~5GW level over
next 3 years, Suzlon’s market share is ~53% on supply basis currently; (3)
Site availability is not a constraint for Suzlon and it requires a 4-5 year
development cycle which will keep new competition entry barrier high for
turnkey wind project execution in India. Market for vanilla equipment
supply is only ~500MW and Suzlon is also competing for its share, (4) Mr.
Tanti stated that Suzlon’s #1 priority in FY12 will be to build an order book
for future years, with India and Europe (for Repower) being the top 2
markets. In our view, this hints to more framework contracts in FY12 similar
to the 1GW Caparo order last fiscal, (5) Management expects absolute level
of working capital to remain stable at FY11 levels next fiscal, despite
~60%+ growth target on volumes. They expect to recover the sticky
receivable of US$204mn from Edison Mission of USA in FY12.
• Status update on the Edison receivable. According to management the
underlying project of ~200MW is operational and is running at high
availability. There are three potential outcomes- a) Edison Mission achieves
financial closure and pays Suzlon before end-FY12, management is banking
on this, (b) the project is sold to a third party, the proceeds would then be
used to pay Suzlon, (c) Suzlon gets a revenue share from the project; the
most adverse scenario in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Suzlon Energy Ltd
Neutral
SUZL.BO, SUEL IN
Analyst meet high on promise -
• Management confident of meeting FY12 guidance. Suzlon has guided to
consol revenue of ~Rs240-260bn and EBIT margin of 7-8%. The group
expects to sell ~2.5GW of turbines in Suzlon wind business in FY12, with
~1.8GW in the domestic market. As per management current backlog
(2.23GW) provides sales visibility for 1.5GW (0.8GW domestic) and they
expect to bag another 1GW of domestic orders for supply in FY12.
Assuming sales realization of ~Rs60mn/MW for wind business, the implied
Repower sales guidance for FY12 is ~Rs90-100bn (vs. our est. of Rs88bn).
We have retained our est. of 2.25GW turbine sales. We await pick-up in
order inflows deliverable in FY12 to become more positive. Our FY12
consol revenue est. is Rs227bn and EBIT margin estimate of 6.5%.
• Positive highlights on operations and growth outlook: (1) Management
emphasized that Suzlon's turbine availability levels exceed 97% (quality
issues are behind), and would require lower guarantee costs (2) Domestic
market is expected to be ~3.5GW in FY12 and may reach ~5GW level over
next 3 years, Suzlon’s market share is ~53% on supply basis currently; (3)
Site availability is not a constraint for Suzlon and it requires a 4-5 year
development cycle which will keep new competition entry barrier high for
turnkey wind project execution in India. Market for vanilla equipment
supply is only ~500MW and Suzlon is also competing for its share, (4) Mr.
Tanti stated that Suzlon’s #1 priority in FY12 will be to build an order book
for future years, with India and Europe (for Repower) being the top 2
markets. In our view, this hints to more framework contracts in FY12 similar
to the 1GW Caparo order last fiscal, (5) Management expects absolute level
of working capital to remain stable at FY11 levels next fiscal, despite
~60%+ growth target on volumes. They expect to recover the sticky
receivable of US$204mn from Edison Mission of USA in FY12.
• Status update on the Edison receivable. According to management the
underlying project of ~200MW is operational and is running at high
availability. There are three potential outcomes- a) Edison Mission achieves
financial closure and pays Suzlon before end-FY12, management is banking
on this, (b) the project is sold to a third party, the proceeds would then be
used to pay Suzlon, (c) Suzlon gets a revenue share from the project; the
most adverse scenario in our view.
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