Sell Suzlon Energy; target of Rs 15: KRChoksey

KRChoksey is bearish on Suzlon Energy and has recommended sell rating on the stock with a target of Rs 15 in its August 16, 2012 research report.

“Suzlon Wind Turbine Business (WTB) reported execution of 150 MW (vs. estimated 420 MW) is below our expectations in Q1FY13. SUEL reported revenue of Rs 4,747 crore (+9.7%, YoY), has impacted the consol sales. Repower executed 120 MW among 4% EBIT margins. Consol EBITDA fell to negative Rs 166 crore (-138%, YoY) and margins fell by 1359 bps on account of high raw material cost (+2183 bps, YoY) and high other expenses (+245 bps, YoY). Consol EBIT margins are -7.2% (vs. guidance of 6%-7%). No relief from debt as consol interest cost increased to Rs 494 crore (+65.7%, YoY). SUEL reported consol net loss of Rs 849 crore in Q1FY13.
SUEL successfully redeemed FCCBs amount of $ 247 mn to bond holders through combination of new FX loan, internal accruals and wind farm sale.”

“SUEL WTB executes 150 MW vs. estimates of 450 MW in Q1FY13 on account of low margin revenue from US market and delay in deliveries in geographies like Brazil and US. Repower expected to perform well led to revenue of $ 550 mn and 4% EBIT margins. Management indicated no change in full year cosol guidance of 4,200 MW execution and 6% EBIT margins. SUEL received order inflow of 456 MW led to order backlog of 5,597 MW (+18%, YoY) shows revenue visibility for next 1.5 years. Order backlog is divided into SUEL India 1,162 MW, SUEL International 660 MW and Repower 3775 MW.”

“Considering the Q1FY13 performance, there is a risk to full year guidance given by management to achieve 6% EBIT margins. Ballooning interest costs due increase in working capital and lower execution by SUEL WTB in the domestic market is deteriorating the balance sheet. We downgrade our recommendation to “SELL” with a TP of Rs 14.9 (from Rs 17.4),” says KRChoksey research report.  

Institutional holding more than 40% in Indian cos   

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