Suzlon energy is well placed to ride the strong demand momentum generating in the US and Europe (via Repower) over the medium-to-long term. Here is a stock report with 12 month target price.
Considering Repower, the combined entity has a global market share of around 12%. Being an end-to-end solutions provider, we believe that Suzlon, has an advantage as compared to peers.
Huge order backlog of REpower:
A shield against storm Currently with an order backlog of € 1.7 billion executable in next 15 months, REpower has positioned itself sweetly with having better revenue
visibility vis-à-vis its competitors, where as others are even struggling for orders. We believe that REpower is a jewel is Suzlon’s crown.
Debt Management:
Increase in moratorium period Suzlon is in process of refinancing its rupee denominated term and working capital loan of Rs70 billion and trade credit facilities (non fund based) worth Rs40 billion. Out of the proposed, the company has received around 80% approval and will have a moratorium period of 2 years.
Improvement in working capital management
There is a dramatic improvement in Suzlon’s working capital management, which is clearly seen reducing its inventories from FY2011. The major reason attributed for this is improvement in inventory management and timely receipt of payments from debtors.
Outlook & Stock Valuation
The international scenario for wind energy is slowly improving after the two year slump which negatively affected all the WTG manufacturers across the globe. The company has successfully managed to restructure its entire debt, it has already received around 80% approval of the proposed amount, which will provide enough breadth for the company to concentrate on core business and increase its revenue and profitability, which will result in hassle-free debt servicing.
Stock valuation of Suzlon is based on weighted average of the DCF (WACC — 10.82%, terminal growth rate — 1.5%) and P/E methodology to arrive at a price target of Rs85. Applying an industry average multiple of 16.0x of our target FY2012E EPS of Rs4.94. It is recommended to BUY STOCKS of Suzlon Energy with potential upside of 20%. A 12 month target price would be Rs 85.
Source: This is a stock research report published by stock market investment research firm a.k. stockmart. You may download pdf of detailed stock report here.
