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Suzlon Energy Ltd.
Option led weakness over;
India orders pick-up; Buy
„F&O volatility behind, 214MW order win up visibility; Buy
Suzlon stock fell 30% in Aug despite a surprise 1Q turnaround reported in July. Apart
from global weakness & shift to defensives, we attribute the excessive fall to a) stock
being in market wide limit in derivative segment (no long allowed) and b) future traded
at large discount in F&O on Aug 16/17 (see Chart 3), led by triggering of margin calls,
which impacted the stock. However in business, visibility has improved with Suzlon
group winning 214MW of orders in last two weeks, adding ~5% to 1Q consol. backlog.
Of which, 163MW of orders were won in India adding ~13% to 1Q domestic backlog &
REpower, won a 51MW order, adding ~2% to its backlog. Buy Suzlon, on a structural
turnaround – reinforced in 2QFY12. Risks to our non-consensus Buy call are delivery
push-back due to weak macro esp. in US/EU, currency and execution.
Won 163MW order in India and 51MW in Canada
„ 85MW orders which include 15MW repeat order from GAIL and balance from
Khatau & Co, Oswal Group, KRBL Ltd & Varun Industries.
„ 48MW repeat order from IOC for 23x2.1MW S88 units to be installed at AP
„ 30MW 6th order from Malpani Group - 5x2.1MW S95 & 7x2.1MW S82
„ REpower won 51MW order from WindWorks Power Corp for 25x2.05MW
MM92 wind turbines for its wind farms spread across Ontario, Canada.
Three catalysts to Buy Suzlon – A turnaround story
1. 25% CAGR till FY13E in the Indian wind markets on higher feed-in tariffs (offset rising interest cost/low wind sites) and new regulation lead entry of IPPs.
Its back-to-basics strategy has paid-off - FY11 India orders up 2.7x to 2.3GW.
2. 28% PAT CAGR in REPower on shift in product-mix to high margin offshore
wind and production of its largest selling 2MW to low cost countries and
3. Recovery of Rs10bn (24% of debtors) in 4QFY12 (Edison), to fund growth as
the project is commissioned in 4QFY11 and is eligible for ITC incentives.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Suzlon Energy Ltd.
Option led weakness over;
India orders pick-up; Buy
„F&O volatility behind, 214MW order win up visibility; Buy
Suzlon stock fell 30% in Aug despite a surprise 1Q turnaround reported in July. Apart
from global weakness & shift to defensives, we attribute the excessive fall to a) stock
being in market wide limit in derivative segment (no long allowed) and b) future traded
at large discount in F&O on Aug 16/17 (see Chart 3), led by triggering of margin calls,
which impacted the stock. However in business, visibility has improved with Suzlon
group winning 214MW of orders in last two weeks, adding ~5% to 1Q consol. backlog.
Of which, 163MW of orders were won in India adding ~13% to 1Q domestic backlog &
REpower, won a 51MW order, adding ~2% to its backlog. Buy Suzlon, on a structural
turnaround – reinforced in 2QFY12. Risks to our non-consensus Buy call are delivery
push-back due to weak macro esp. in US/EU, currency and execution.
Won 163MW order in India and 51MW in Canada
„ 85MW orders which include 15MW repeat order from GAIL and balance from
Khatau & Co, Oswal Group, KRBL Ltd & Varun Industries.
„ 48MW repeat order from IOC for 23x2.1MW S88 units to be installed at AP
„ 30MW 6th order from Malpani Group - 5x2.1MW S95 & 7x2.1MW S82
„ REpower won 51MW order from WindWorks Power Corp for 25x2.05MW
MM92 wind turbines for its wind farms spread across Ontario, Canada.
Three catalysts to Buy Suzlon – A turnaround story
1. 25% CAGR till FY13E in the Indian wind markets on higher feed-in tariffs (offset rising interest cost/low wind sites) and new regulation lead entry of IPPs.
Its back-to-basics strategy has paid-off - FY11 India orders up 2.7x to 2.3GW.
2. 28% PAT CAGR in REPower on shift in product-mix to high margin offshore
wind and production of its largest selling 2MW to low cost countries and
3. Recovery of Rs10bn (24% of debtors) in 4QFY12 (Edison), to fund growth as
the project is commissioned in 4QFY11 and is eligible for ITC incentives.
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