KR Choksey is bullish on Suzlon Energy has recommended buy rating on the stock with a target price of Rs 15 in its research report dated July 02, 2018.
KR Choksey's research report on Suzlon Energy
We recently met Mr. Kirti Vagadia, Group CFO, Suzlon Energy Ltd, to get insights about present developments within the industry as well as the company. During our meet, Mr. Vagadia explained to us about the challenging times in FY18 along with promising outlook with healthy order backlog in the near future post improvement in the order announcements by SECI. The management seems confident that the Indian wind sector will witness 8-10 GW of capacity addition every year for next 4-5 years, which could translate into capacity addition of ~2-2.5 GW p.a. by Suzlon given its dominant market share. The expectation of robust capacity addition is attributable to the national wind energy target of 60 GW by FY22. Further, sharp cut in the wind tariff post change in the regime could also result into adoption of more green energy as against thermal in the years to come. We expect the progress could also get ramped up once there is be successful adoption of a wind hybrid technology, which will improve the average PLF in the industry. In terms of the technology, management highlighted Suzlon has always remained foremost in terms of the latest technology adoption, which can be ascertained from the fact of launching of S111/140, S128/140 ahead of competition.
We expect similar trend is likely to continue in the future, which could assist the company to maintain/improve its market share in the overall industry. In terms of the debt repayment, the company is considering to divest its stake in domestic O&M business this fiscal, which could help them to reduce LT debt. The company has overall debt excl. FCCB stands at INR -108.6bn as on FY18 of which LT & ST debt remained at INR 69.7bn & INR 38.9bn respectively. Going ahead, we expect net debt to EBITDA to fall to 4.8x by FY20E from 11.4x in FY18.
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