Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Risk reward remains unfavourable
While order booking and sales have been strong in Suzlon’s domestic
business over the last few quarters, international operations have
disappointed. Strength in domestic business alone is unlikely to be
sufficient to force a turnaround. Management’s FY12 guidance for 35-
45% YoY revenue growth and a 6-7ppt improvement in Ebit margin also
looks aggressive, while net gearing ratio remains high at 1.5x. While
acquisition of the remaining Repower stake will be a positive, it is time
consuming and may require lender approval. Maintain U-PF.
Domestic business strong but overseas weak
Suzlon Wind’s domestic sales (1,169MW, +70% YoY) and order booking
(2,292MW, +170% YoY) picked up sharply in FY11. However, international
sales fell 55% YoY to 352MW. Moreover, overseas order backlog stood flat YoY
at 877MW, implying that any significant recovery in the international business
is unlikely in the near term. We believe that a turnaround for Suzlon Wind will
be difficult to achieve (break-even level of 2GW annual sales, according to
management) on the strength of domestic business alone.
Aggressive FY12 guidance
Adjusting for forex gains, Suzlon Wind reported a loss of Rs810m at the PBT
level in 4QFY11, suggesting that any meaningful improvement in operational
performance is yet to be seen. Management has guided for consolidated
revenue of Rs240-260bn (+35-45% YoY) and Ebit margins of 7-8% (6-7ppt
improvement YoY) for FY12. We believe that the company is likely to miss this
target, especially as the overseas business remains weak.
High leverage remains a concern
Suzlon Wind’s net gearing stood at Rs102bn (1.5x gearing ratio) at FY11-end.
FCCBs of US$247m will mature in June 2012, while another US$142m will
mature in October 2012, with a conversion price 50-90% higher than the
current market price; Suzlon has already restructured these FCCBs earlier.
Auditors included a matter of emphasis for non-provision of premium on
redemption of convertible debentures (Rs5.8bn) in 4QFY11 results.
Maintain U-PF
The acquisition of the remaining Repower stake will be a positive
development for Suzlon. However, synergy benefits could take time to
materialise. In the meantime, poor international sales and upcoming debt
payments are major concerns. The risk-reward profile looks unfavourable and
we maintain our underperform rating with a target price of Rs50/sh
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Risk reward remains unfavourable
While order booking and sales have been strong in Suzlon’s domestic
business over the last few quarters, international operations have
disappointed. Strength in domestic business alone is unlikely to be
sufficient to force a turnaround. Management’s FY12 guidance for 35-
45% YoY revenue growth and a 6-7ppt improvement in Ebit margin also
looks aggressive, while net gearing ratio remains high at 1.5x. While
acquisition of the remaining Repower stake will be a positive, it is time
consuming and may require lender approval. Maintain U-PF.
Domestic business strong but overseas weak
Suzlon Wind’s domestic sales (1,169MW, +70% YoY) and order booking
(2,292MW, +170% YoY) picked up sharply in FY11. However, international
sales fell 55% YoY to 352MW. Moreover, overseas order backlog stood flat YoY
at 877MW, implying that any significant recovery in the international business
is unlikely in the near term. We believe that a turnaround for Suzlon Wind will
be difficult to achieve (break-even level of 2GW annual sales, according to
management) on the strength of domestic business alone.
Aggressive FY12 guidance
Adjusting for forex gains, Suzlon Wind reported a loss of Rs810m at the PBT
level in 4QFY11, suggesting that any meaningful improvement in operational
performance is yet to be seen. Management has guided for consolidated
revenue of Rs240-260bn (+35-45% YoY) and Ebit margins of 7-8% (6-7ppt
improvement YoY) for FY12. We believe that the company is likely to miss this
target, especially as the overseas business remains weak.
High leverage remains a concern
Suzlon Wind’s net gearing stood at Rs102bn (1.5x gearing ratio) at FY11-end.
FCCBs of US$247m will mature in June 2012, while another US$142m will
mature in October 2012, with a conversion price 50-90% higher than the
current market price; Suzlon has already restructured these FCCBs earlier.
Auditors included a matter of emphasis for non-provision of premium on
redemption of convertible debentures (Rs5.8bn) in 4QFY11 results.
Maintain U-PF
The acquisition of the remaining Repower stake will be a positive
development for Suzlon. However, synergy benefits could take time to
materialise. In the meantime, poor international sales and upcoming debt
payments are major concerns. The risk-reward profile looks unfavourable and
we maintain our underperform rating with a target price of Rs50/sh
No comments:
Post a Comment