Suzlon – a Good Investment at Low Price

Suzlon – a Good Investment at Low Price

Suzlon - Latest Results

(in Cr.)
Sep-11
Jun-11
FY10-11
Revenue
1,943.57
1,156.91
4,366.39
Net Profit
-19.39
110.07
-185.66
EPS
-0.11
0.62
-1.09
Cash EPS
0.15
0.81
-0.16
OPM %
12.04
26.06
10.87
NPM %
-1
9.51
-4.25
 
 
 
 
Suzlon - Latest Results

Suzlon - Share Price Movement

 
 
 
Weekly H/L
19.8
18.5
Monthly H/L
24.4
17.5
52 Weeks H/L
58.45
17.5
 
( 21 Apr 11 )
( 20 Dec 11 )
Delivery / Var+ELM %
14.79
19.13
 
 
 
Suzlon - Share Price Movement

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Suzlon – a Good Investment at Low Price

Suzlon – a Good Investment at Low Price
Suzlon – a Good Investment at Low Price | Source
Suzlon - share price movement
Suzlon - share price movement | Source

Suzlon – a Good Investment at Low Price


Signs of turnaround

Suzlon Energy Ltd has slipped into the red for the quarter ended 30.09.11 even though its revenue has increased appreciably. For the last two years the company has been posting net losses but this year there are signs of a turnaround. The shares of Suzlon are traded in the Indian stock markets at Rs.19.20 now (BSE 28.12.11). The shares of the company are available in both BSE and NSE. The promoters of the company have pledged 1.68% of their stakes. The two promoter holdings are Tanti holdings and Samanvaya Holdings. The company is engaged in wind energy generation.

Untapped potential in wind energy

India’s installed wind energy capacity at 15 GW is fifth largest in the world. India’s wind energy potential is estimated at 48 GW. Two thirds of this potential is yet to be harnessed. Suzlon’s new S9X wind turbines are designed to tap wind energy in places where the speed of wind is only moderate. The S9X suite is of 2.1 MW capacities. The company has received approval from the government of South Africa to supply wind turbines for the upcoming Cookhouse Wind Energy facility at Eastern Cape. Suzlon is planning production facility in Madurai in southern Tamil Nadu at an investment cost of Rs.50 crore. Suzlon is India’s largest wind energy producer.

FCCB for Rs.3000 crore worries the company

Suzlon is to set up coastal turbine facility in Britain. Suzlon has bagged an order from Gas Authority of India (GAIL) to build and commission 11 units of 2.1 MW wind turbines in Karnataka and Tamil Nadu (totally 23 MW). Even though Suzlon is bagging different orders from India and other countries, its debt position is worrying. The company has in its books, foreign currency convertible bonds for Rs.3000 crore partly due for conversion next year. It is unlikely that the investors will opt for conversion at the present low price of the stock of the company. Instead, they may press for cash which will add pressure to the company’s financial position. This is the reason why the stock markets are refusing to look at the shares of Suzlon with respect even though the company is performing very well.

Chinese companies may end Suzlon’s domination

The € 1.2 billion German company JUWI is negotiating with Kenersys and Suzlon and is planning to construct a concrete tower unit. It is also open to equity stake in some of the local firms. There is a need to double India’s wind power capacity in the near future to tackle the pressing power problems. Thermal power units are languishing due to lack of adequate coal supply. New coal fields are not opened because of environmental reasons. Imported coal is very costly at a time when the rupee is weakening every day against the dollar. Therefore the accent has fallen on renewable energy sources like solar power and wind energy. Suzlon is comfortably placed to benefit from this demand. But Suzlon’s domination in wind power sector may not last long. Chinese companies are aggressively penetrating into the Indian markets and other markets in the world to offer a tough competition to Suzlon. As wind based power generation is free of fuel expenses, scalable and a clean source of power, more and more people and governments are opting for wind power. Tamil Nadu State in India has the maximum installed wind energy to the tune of 5904 MW.

Supplying wind power to Australian homes

Sometimes Suzlon also encounters problems in its operations. The company has been indicted by a panel for encroaching into tribal lands in Kerala. Suzlon is planning to set up a wind farm project in Australia at an investment cost of $1.4 billion. The company has launched a clean air campaign in tune with is brand image. For the last two years, Suzlon has been incurring a net loss. If it turns around, the markets will view the company with respect. It is a surprise that inspite of robust order books and growing sales, the company is unable to get out of the quagmire of losses. This shows that the company’s management is inefficient.

Acquisition of REpower has added synergies

Suzlon has agreed to divest its stake in Hansen Transmissions International to ZF Friedrichshafen AG of Germany for $187 million. The company’s American subsidiary Suzlon Rotor Corporation has been fined for $490000 for violating pollution norms in USA. Suzlon has bagged Rs.650 crore orders from Orient Green Power to supply wind turbines with capacity over 100 MW. The company’s buyout of REpower has added to synergies of both the companies. REpower is a cash rich company and has small debt in its balance sheet. REpower is Europe’s largest offshore wind turbine maker. The company’s share price was rising for two days some months back because of the interest shown by Barclays Bank in the counter. Barclays Capital bought 0.6% of stake in Suzlon.

Fifth largest wind turbine manufacturer in the world

Suzlon is looking forward to set up hybrid energy sites. Suzlon signed a $1.28 billion deal with Caparo Energy of Hyderabad for developing 1000 MW wind power projects in India. Suzlon is planning to raise Rs.5000 crore through issue of shares or other means. The company’s North American subsidiary Suzlon Wind Energy Corporation has bagged a new order for installing 2.1 MW wind turbines for a wind power project developed by Sprott Power Corporation of Canada. Suzlon is world’s fifth largest wind turbine manufacturer. After the promoter group sold more than 2% of the stake in the company, there were anxieties in the market circles about the intention of the promoters. Questions were also raised as to whether the promoters of Suzlon want to quit the company. But subsequently the promoters have denied any such intention.

Invest for medium and long term

Investors can buy the shares of Suzlon Energy Ltd at the current market price of Rs.19.20 for medium and long term holding for decent returns

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