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Suzlon (XZULF, Buy)
Bear Case: What can go wrong
In our bear case, we expect a slowdown in wind energy capex especially in
international markets. We assumed a 15-16% cut in Suzlon group WTG
volume over FY13-14E leading to 1%YoY fall in FY13E volume.
Consequently, we expect 2%YoY fall in FY13E sales and 23% growth in
FY14E. Further, expect 11-25bps cut in base case margin over FY13-14E.
Expect interest rate to go up, hence, we increase interest rate (ex-FCCB) by
50bps in FY13-14E.
Hence, we expect 50-35% cut in our base case EPS over FY13-14E leading
to 37% earnings CAGR over FY12-14E. We have not built-in REpower
integration synergy benefit of Euro200mn in FY13E as well.
Lower cash-flows, could impact repayment of FCCBs.
We expect Suzlon to de-rate in-line with global comps and trade at lower PE
multiple of 8x.
Base Case: Turn to profitability on-track
In the base case, we expect Suzlon group WTG volume to grow at 18% in
FY13E and 21% in FY14E.
Consequently, we estimate 15-20% growth in consol. sales over FY13-14E.
Expect margin to improve to ~11.2-11.3% over FY13-14E (10.5% in FY12E).
We expect an EPS CAGR of 71% over FY12-14E on a low base.
We expect Suzlon to de-rate in-line with its global peers / markets, hence we
cut our multiple to 11x (13x) 1-yr forward EPS which is in line with European
comparables and cut our PO by 15% to Rs55 (from Rs65).
Risk-Reward: Favorable given visible turn
In the bear case, we expect Suzlon to trade at Rs23 per share based on
based on 8x 1-year forward consol EPS less premium on FCCBs
redeemable after FY14E.
In the base case, we value Suzlon at Rs55 per share based on 14x 1-year
forward consol EPS less premium on FCCBs redeemable after FY14E.
Overall, the risk-reward appears favorable
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Suzlon (XZULF, Buy)
Bear Case: What can go wrong
In our bear case, we expect a slowdown in wind energy capex especially in
international markets. We assumed a 15-16% cut in Suzlon group WTG
volume over FY13-14E leading to 1%YoY fall in FY13E volume.
Consequently, we expect 2%YoY fall in FY13E sales and 23% growth in
FY14E. Further, expect 11-25bps cut in base case margin over FY13-14E.
Expect interest rate to go up, hence, we increase interest rate (ex-FCCB) by
50bps in FY13-14E.
Hence, we expect 50-35% cut in our base case EPS over FY13-14E leading
to 37% earnings CAGR over FY12-14E. We have not built-in REpower
integration synergy benefit of Euro200mn in FY13E as well.
Lower cash-flows, could impact repayment of FCCBs.
We expect Suzlon to de-rate in-line with global comps and trade at lower PE
multiple of 8x.
Base Case: Turn to profitability on-track
In the base case, we expect Suzlon group WTG volume to grow at 18% in
FY13E and 21% in FY14E.
Consequently, we estimate 15-20% growth in consol. sales over FY13-14E.
Expect margin to improve to ~11.2-11.3% over FY13-14E (10.5% in FY12E).
We expect an EPS CAGR of 71% over FY12-14E on a low base.
We expect Suzlon to de-rate in-line with its global peers / markets, hence we
cut our multiple to 11x (13x) 1-yr forward EPS which is in line with European
comparables and cut our PO by 15% to Rs55 (from Rs65).
Risk-Reward: Favorable given visible turn
In the bear case, we expect Suzlon to trade at Rs23 per share based on
based on 8x 1-year forward consol EPS less premium on FCCBs
redeemable after FY14E.
In the base case, we value Suzlon at Rs55 per share based on 14x 1-year
forward consol EPS less premium on FCCBs redeemable after FY14E.
Overall, the risk-reward appears favorable
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