Nov 15, 2012, 06.23 PM | Source: Moneycontrol.com
KRChoksey is bearish on Suzlon Energy and has recommended sell rating on the stock with a target of Rs 15 in its November 15, 2012 research report.
, KRChoksey |
“Suzlon Group reported execution of 1,268 MW (vs. estimated 932 MW), however generated Gross profit per MW is Rs 1.2 crore (vs. Rs 1.9 crore, -62%) is below our expectations in Q2FY13. It led the consol sales growth up by 12.4%, YoY. Consol EBITDA fell to negative Rs 108 crore (-123%, YoY) and margins fell by 1,127 bps on account of high raw material cost (+1064 bps, YoY) and high other expenses (+218 bps, YoY). Consol EBIT margins are -4.8% (vs. guidance of 6%-7%). No relief from debt as consol interest cost increased to Rs 418 crore (+16.7%, YoY). SUEL reported consol net loss of Rs 808 crore in Q2FY13. SUEL has submitted corporate debt restructuring (CDR) plan to lenders and seeks a 10 year long term repayment period for debt, including two year moratorium on principal and term-debt interest payments and additional working capital facilities. Management indicated that debt restructuring plan will be finalized in Q4FY13 as discussion with lenders going on.”
“SUEL Group received healthy order inflows of 1,071 MW, with the orderbacklog of 5,400 MW that has improved the revenue visibility for FY14E. Geographies like Belgium, Germany, UK and others has contributed strong order inflow. SUEL has guided revenue of Rs 270 bn and 6% EBIT margins based on Rs 370 bn order backlog have been suspended by management. Suzlon reported high wind business net debt of Rs 132 bn at end 2QFY13, which is an increase of about Rs 10 bn versus FY12 levels of about Rs 121 bn. The company failed to get the four month extension for the payment of the October tranche of FCBBs resulting in a non-payment. We find some sequential reduction in Suzlon’s working capital levels, declined to about 23.8% of sales at end of 2QFY13 against 27% at the end of the previous quarter.”
“Due to negative cashflow, the company is unable to execute current orderbacklog and seeking extra working capital facilities from lenders. Further the huge debt and lower profitability (expected 6% EBIT margins), default to bond holders and entry into CDR space. We maintain SELL recommendation with a TP of Rs 14.90,” says KRChoksey research report.
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