Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A strong quarter
Suzlon's 1Q FY12 performance was better than expected - revenues were
up 80% YoY and the company reported Ebitda margin of 8.9%. This was
primarily on account of volumes doubling YoY and Suzlon exercising
control over material costs (down 8ppt YoY) and other expenses. The
management has maintained its full year guidance of revenues of Rs240-
260bn and Ebit margin of 7-8% (7.6% in 1Q). If this guidance is achieved
the company may report Rs5-6bn profit for full year versus our estimate
of c.Rs1bn loss. However, uncertainties regarding demand outlook for
FY13 and concerns regarding high gearing remain. Maintain U-PF.
1Q FY12 - strong earnings
In 1Q FY12 Suzlon’s sales were strong in the domestic market (304MW),
while they continued to be weak overseas (133MW). Ebitda margin improved
to 9.7%, with material costs (down 8ppt YoY) and other overheads (down
15ppt YoY) falling sharply, due to improved utilisation in 1QFY12. Repower
also reported strong earnings growth (80% YoY) and robust Ebitda margins
(7.5%) in Suzlon’s books. Its performance was helped by fx translation
benefits, without which its profits would have been lower at Rs280m, cf.
Rs820m that Suzlon booked. Auditors have given a matter of emphasis on
non-provision of FCCB redemption premium of Rs6.4bn.
Likely upside to full year numbers
The strong 1Q performance raises hopes of a stronger-than-expected FY12.
The company has achieved 20% of our full year volume forecasts for Suzlon
Wind in 1Q. If the company is able to achieve its guidance of Rs240-260bn
sales (40-50% growth) and 7-8% Ebit margins it could achieve a profit of
around Rs5-6bn in FY12, compared to our estimate of c.Rs1bn loss. We
believe 1Q was an unusually strong quarter this year (usually accounts for
14-15% of sales volumes; this year it is 20% of our full year estimate). With
order backlog falling for the second successive quarter, Suzlon Wind will need
strong order booking over the course of FY12 to sustain this momentum.
Uncertainties remain
One of the key reasons for the strong domestic demand in 1Q FY12 is likely
discontinuation of accelerated 80% depreciation for tax purposes next year.
In that case there is a risk of demand decline in the domestic market in FY13.
Completion of acquisition and subsequent integration of REpower should help
Suzlon get access to better quality products and improve REpower's margins.
However, these are unlikely to be sufficient to enable the company meet the
large debt repayment obligations for FY13 and FY14. We believe Suzlon will
need a largish equity issuance for this. Any weakness in domestic demand
can also scuttle the recovery process. Maintain U-PF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A strong quarter
Suzlon's 1Q FY12 performance was better than expected - revenues were
up 80% YoY and the company reported Ebitda margin of 8.9%. This was
primarily on account of volumes doubling YoY and Suzlon exercising
control over material costs (down 8ppt YoY) and other expenses. The
management has maintained its full year guidance of revenues of Rs240-
260bn and Ebit margin of 7-8% (7.6% in 1Q). If this guidance is achieved
the company may report Rs5-6bn profit for full year versus our estimate
of c.Rs1bn loss. However, uncertainties regarding demand outlook for
FY13 and concerns regarding high gearing remain. Maintain U-PF.
1Q FY12 - strong earnings
In 1Q FY12 Suzlon’s sales were strong in the domestic market (304MW),
while they continued to be weak overseas (133MW). Ebitda margin improved
to 9.7%, with material costs (down 8ppt YoY) and other overheads (down
15ppt YoY) falling sharply, due to improved utilisation in 1QFY12. Repower
also reported strong earnings growth (80% YoY) and robust Ebitda margins
(7.5%) in Suzlon’s books. Its performance was helped by fx translation
benefits, without which its profits would have been lower at Rs280m, cf.
Rs820m that Suzlon booked. Auditors have given a matter of emphasis on
non-provision of FCCB redemption premium of Rs6.4bn.
Likely upside to full year numbers
The strong 1Q performance raises hopes of a stronger-than-expected FY12.
The company has achieved 20% of our full year volume forecasts for Suzlon
Wind in 1Q. If the company is able to achieve its guidance of Rs240-260bn
sales (40-50% growth) and 7-8% Ebit margins it could achieve a profit of
around Rs5-6bn in FY12, compared to our estimate of c.Rs1bn loss. We
believe 1Q was an unusually strong quarter this year (usually accounts for
14-15% of sales volumes; this year it is 20% of our full year estimate). With
order backlog falling for the second successive quarter, Suzlon Wind will need
strong order booking over the course of FY12 to sustain this momentum.
Uncertainties remain
One of the key reasons for the strong domestic demand in 1Q FY12 is likely
discontinuation of accelerated 80% depreciation for tax purposes next year.
In that case there is a risk of demand decline in the domestic market in FY13.
Completion of acquisition and subsequent integration of REpower should help
Suzlon get access to better quality products and improve REpower's margins.
However, these are unlikely to be sufficient to enable the company meet the
large debt repayment obligations for FY13 and FY14. We believe Suzlon will
need a largish equity issuance for this. Any weakness in domestic demand
can also scuttle the recovery process. Maintain U-PF.
No comments:
Post a Comment