Time to buy Suzlon Energy? Sure, say analysts

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Time to buy Suzlon Energy? Sure, say analysts

A strong inflow of orders will power Suzlon Energy’s earnings in FY12, say brokerages

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Suzlon Energy BSE | NSE 29/05/12 Are Mutual Funds betting on Suzlon Energy?

Moneycontrol Bureau

Strong order inflow will power Suzlon Energy 's earnings in fiscal year 2012 (FY12)-that is the word from brokerages. This can be substituted with the fact that the company along with its subsidiaries-RePower and Suzlon Wind has bagged 226 megawatts (MW) orders recently. During Q4FY11, analysts who had refrained from advising a 'buy' on the wind energy producer have suddenly revised their recommendations saying, the order size would be key to the performance of the stock going forward.

Analysts expect April-June quarter of FY12 at Suzlon to be less disappointing on year-on-year basis (YoY) backed by strong orders. The company will report profit at the EBITDA level of Rs 1.6 billion compared to an EBITDA loss of Rs 4 billion YoY, said Mohit Kumar from Antique Broking in his report.

Echoing similar sentiment, other brokerages too expect Suzlon to be profitable in the current financial year on the back of the shorter execution cycle and healthy current order backlog. "The company is likely to be the biggest beneficiary of the ongoing independent power produce (IPP) flurry in the Indian wind market due to the launch of its attractive portfolio of wind sites coupled with a proven execution track record," stated Ambit Capital Research.

Three catalysts to 'Buy' Suzlon

• Analysts expect 25% CAGR till the end of FY13 in the Indian wind market on higher feed-in tariffs which will offset rising interest cost.
• The 226MW order size procured by Suzlon corroborates with the robust domestic demand.
• Suzlon Energy is eyeing to get hold of technology firms which will help it drive the next generation of technological development in wind energy.
• The company will see sales of 2,165 MW from the total order book of 2.2GW it has currently.

Key takeaways from brokerages

Ambit Finance Corporation

We maintain our BUY stance on Suzlon Energy. We expect Suzlon Wind to execute 360MW in 1QFY12 versus 207MW in 1QFY11 on the back of its dominant share of Indian customers in its existing order.

Bank of America Merill Lynch

We believe that Suzlon is bottoming out led by its new strategy of focusing domestically where there is robust demand. Indian market is rebounding led by fixing of regulation and higher feed-in tariffs. The company's focus on high-margin, off-shore market and cost-cutting at RePower will realign Suzlon's product mix into profitable markets and cause profitability in FY12E after two years of losses.

Antique Broking

We recommend a BUY rating on the stock with a target price of Rs 69 in the medium-term.

Note: sales and profit figures are in Rs crore. *Considered three brokerages for expecations.

Also read: Buy Suzlon Energy; target of Rs 64: KRChoksey

Shaheen Mansuri
shaheen.mansuri@network18online.com