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Key Takeaways
Operating performance turns around; Suzlon on track to achieve guidance
Suzlon Energy's (SUEL) consolidated order book was USD6.6b, up 42% YoY (Suzlon
Wind USD2.5b, up 13% YoY; REpower USD4.1b, up 69% YoY). In terms of volumes
the order book was 4.7GW (Suzlon Wind, 2GW, REpower, 2.71GW). SUEL received
fresh orders of 160MW in August 2011.
The management expects consolidated sales of INR240b-260b (Suzlon Wind, INR14b-
16b; REpower INR9b-10b) and FY12 EBIT margins are expected to be 7% (v/s 8%
in 1QFY12). It also expects gross margins to improve to 30% from 22-23%, driven
by full realization of synergies from Repower operations by the end of FY13-14.
In Suzlon Wind over 60% (1.2GW, up 116% YoY) of the orders were from India,
which posted strong growth in 1QFY12. Out of total orders of 2GW in Suzlon Wind
1.4-1.5GW are to be delivered in FY12. In 1QFY12 SUEL delivered 437MW of turbines,
and therefore there is clear visibility of 1,800-1,900MW (437MW plus 1,400MW) in
FY12. SUEL expects to have FY12 sales of 23GW (out of this 1.8GW will be in India).
Emerging markets drive market outlook
The cost of wind power has fallen considerably in the recent past and now is almost
equal to other economical sources of energy. Regulatory changes, generation-based
incentives (GBI) and a rise in the cost of traditional sources of electricity have brought
the cost of wind energy to an economic and viable level.
In FY11 there was a record number of installations in China, dominated by domestic
players. However, recently China has removed compulsory local content requirement
and import duties which will benefit international players. The 12th Five Year Plan
targets 90GW of wind installations by 2015. Experts estimate that Indian market will
grow to 2-2.2GW in 2011 and 2.6-3GW 2012. Brazil, where half the installations are
supplied by SUEL, is expected to grow from 700MW to 6GW by 2019.
US markets are low due to low gas prices and the Canadian market is affected by
low PPA prices. However markets show improved prospects for 2011-12, compared
with the lows of 2010.
European markets are stable but more saturated and hence growing slowly. SUEL
sees growth potential in countries like Sweden, Poland and Romania. Other growing
markets include Germany, Belgium and Denmark.
Other takeaways
The management will increase stake in REpower to 100% by acquiring the remaining
5% stake for Euro63m. SUEL will also sell its 26% stake in Hansen, which will fetch
GBP150m (a 96% premium to the market price).
The company is expected recover INR10b from Edison (24% of debtors) in 2HFY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Operating performance turns around; Suzlon on track to achieve guidance
Suzlon Energy's (SUEL) consolidated order book was USD6.6b, up 42% YoY (Suzlon
Wind USD2.5b, up 13% YoY; REpower USD4.1b, up 69% YoY). In terms of volumes
the order book was 4.7GW (Suzlon Wind, 2GW, REpower, 2.71GW). SUEL received
fresh orders of 160MW in August 2011.
The management expects consolidated sales of INR240b-260b (Suzlon Wind, INR14b-
16b; REpower INR9b-10b) and FY12 EBIT margins are expected to be 7% (v/s 8%
in 1QFY12). It also expects gross margins to improve to 30% from 22-23%, driven
by full realization of synergies from Repower operations by the end of FY13-14.
In Suzlon Wind over 60% (1.2GW, up 116% YoY) of the orders were from India,
which posted strong growth in 1QFY12. Out of total orders of 2GW in Suzlon Wind
1.4-1.5GW are to be delivered in FY12. In 1QFY12 SUEL delivered 437MW of turbines,
and therefore there is clear visibility of 1,800-1,900MW (437MW plus 1,400MW) in
FY12. SUEL expects to have FY12 sales of 23GW (out of this 1.8GW will be in India).
Emerging markets drive market outlook
The cost of wind power has fallen considerably in the recent past and now is almost
equal to other economical sources of energy. Regulatory changes, generation-based
incentives (GBI) and a rise in the cost of traditional sources of electricity have brought
the cost of wind energy to an economic and viable level.
In FY11 there was a record number of installations in China, dominated by domestic
players. However, recently China has removed compulsory local content requirement
and import duties which will benefit international players. The 12th Five Year Plan
targets 90GW of wind installations by 2015. Experts estimate that Indian market will
grow to 2-2.2GW in 2011 and 2.6-3GW 2012. Brazil, where half the installations are
supplied by SUEL, is expected to grow from 700MW to 6GW by 2019.
US markets are low due to low gas prices and the Canadian market is affected by
low PPA prices. However markets show improved prospects for 2011-12, compared
with the lows of 2010.
European markets are stable but more saturated and hence growing slowly. SUEL
sees growth potential in countries like Sweden, Poland and Romania. Other growing
markets include Germany, Belgium and Denmark.
Other takeaways
The management will increase stake in REpower to 100% by acquiring the remaining
5% stake for Euro63m. SUEL will also sell its 26% stake in Hansen, which will fetch
GBP150m (a 96% premium to the market price).
The company is expected recover INR10b from Edison (24% of debtors) in 2HFY12.
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