tips to buy best engineering suzlon energy buying and selling stocks in India

In fact, the order book fell nearly 60 per cent last year and now covers just about a year’s sales. But the company hopes to win export orders for 500 Mw.
However, the environment shows little signs of improvement - sales of second-hand turbines are believed to be increasing and oversupply in global markets, analysts point out, could result in sales staying flat in the current year.

As if a challenging environment was not enough, Suzlon’s finances have been in a bit of a mess with the company having a total debt of close to Rs 12,000 crore and a net debt to equity ratio of over one.

The company has managed to restructure FCCBs worth $ 500 million, get some loan covenants relaxed, and plans to use less working capital. However, it needs to raise some equity. Suzlon is mulling sale of a portion of its stake in Hansen Transmissions, it’s Belgian subsidiary in which it holds just over 61 per cent. It may also raise money through a QIP. Since March, the stock has risen 204 per cent to Rs 117, outperforming the Sensex by a huge margin.

While the company’s operating profit margins, which slipped to 10 per cent last year, could see some revival with commodity prices easing, analysts aren’t comfortable with the weak backlog in orders and the challenging environment.
source - BS

Suzlon Energy Ltd (updated - 28 Mar 2009)
Wind energy player Suzlon needs to rustle up an estimated Rs 1,300 crore in the next few months to be able to pay for Martifer’s 17 per cent stake in REPower. There are reports that the Puneheadquartered company is exploring sale of a part of its stake in its Belgian subsidiary, Hansen. Besides, it may place shares with a private equity fund. That apart, the 13,679-crore Suzlon hopes to lower its working capital and inventories.

The company is estimated to have piled up inventories of over Rs 5,000 crore because some orders could not be executed. HSBC believes Suzlon will at best be able to recover around Rs 500 crore from better use of working capital, leaving Rs 800 crore to be raised by other means. Also, since the company’s net debt at the end of December 2008 was close to Rs 10,000 crore, there is little room to borrow further.

As for the equity option, sale of Suzlon’s shares at the current market price of around Rs 45 could dilute the equity to a fairly large extent if the company is looking to raise about Rs 700 crore, as reported.

The good news is that after a break of almost a year, orders have started flowing in. Last month saw a 113 Mw order from the Australian utility, AGL Energy, which is an encouraging sign given the instances of blade cracks in January 2008. At the end of December 2008, Suzlon had completed around 30 per cent retrofitting of the blades, having provided Rs 450 crore for the programme, which is expected to be completed by June this year. The management believes it should be able to win orders for about 1,000 Mw across Europe, China and Australia in the next six months or so. The stock has lost 80 per cent of its value over the past year but until it completes the REPower buyout, investors will stay cautious.
source - BS

Suzlon Energy Ltd (updated - 17 June 2009)
Wind energy player Suzlon is reportedly mulling a sale of some portion of its stake in Hansen Transmissions, it’s Belgian subsidiary in which it holds just over 61 per cent.

It really doesn’t have too much of a choice because of the debt that it has piled up on its books, estimated at close to Rs 12,000 crore. To its credit the company has managed to find the resources to buy out Martifer’s 17 per cent stake in RePower to up its stake to nearly 91 per cent in the German firm.

Besides, Suzlon has managed to restructure $500 million worth of FCCBs, reducing the liability to $389 million and also to get its debt covenants relaxed for the loan taken to acquire RePower. The Street has taken note of these developments — since March 2009 the stock has risen 211 per cent to Rs 120 outperforming the Sensex by a huge margin. However, challenges remain.

For one, the company’s capacity of 5,700 Mw capacity does appear somewhat high given that the order backlog at the end of December 2008 was around 2000 Mw.
No doubt a few orders have come its way since then but the company needs to win back customer credibility after instances of blades cracking at a couple of units prompted customers to withdraw orders.

If it manages to sell the Hansen stake at a good price and also to raise Rs 2,000 crore through a QIP as it is reportedly planning, it would reassure investors who are concerned about the high levels of debt.
source - BS

Suzlon Energy Ltd (updated - 06 Aug 2009)
Suzlon’s consolidated losses of close to Rs 430 crore in the June 2009 quarter as against a profit of Rs 240 crore in the corresponding period of the previous year are worrying because they are the result of poor sales volumes, both in domestic and international markets. Volumes at 123 Mw are down 64 per cent year-onyear (ex-REpower) and perhaps the lowest in a quarter in the last four years.

Moreover, the 66 per cent drop in international business after the robust performance in the March 2009 quarter comes as a disappointment even though market conditions are undoubtedly challenging. Unfortunately, for the company, it has been adding capacity over the past couple of years and that has driven up fixed costs. As a result, Suzlon barely managed to stay profitable even at the operating level and the operating profit margin (OPM) came off from over 17 per cent in the June 2008 quarter to under 0.5 per cent in the June 2009 quarter. Since the outflow on interest more than doubled to Rs 313 crore, losses were inevitable. The bad news is that the outlook in the near term isn’t too bright.

The management says things will be rough for the next three months given the oversupply of wind turbines in an already weak global market. While orders may come through, prices fetched by turbines remains to be seen in a weak market, feel industry watchers. However, business should pick up in the domestic market — it’s possible that prospective customers delayed purchases as they waited for clarity on depreciation norms for wind energy investments in the Union Budget.

Nevertheless, it’s Suzlon’s Belgian subsidiary Hansen, which has indicated that revenues this year could be flat due to the operating environment, that’s the biggest cause of concern. Suzlon managed to raise $202 million, just in the nick of time it would appear, through a combination of GDRs and FCCBs. Together the issues will result in an equity dilution of less than 7 per cent.

Despite this, most analysts have downgraded earnings estimates for the current year and targets for the stock price are around Rs 70-80 compared to the current price of Rs 96.
source - BS

Suzlon Energy Ltd (updated - 30 June 2009)
It’s been all headwinds for wind energy player Suzlon in 2008-09 with net profit falling 77 per cent to Rs 237 crore from Rs 1,030 crore in the previous year, although revenues almost doubled to Rs 26,259 crore.

Of course, there were several one-off expenses, including additional provisions for retrofitting blades, warranties, damages in some markets and hedging losses, but the stock lost 5 per cent on Monday. The good news is that over 80 per cent of the cracked blades have been retrofitted. In the current year, the company hopes to achieve sales of 2,4002,600 Mw, but the order book at around 1,500 Mw looks less robust than what it was a couple of years.

Suzlon Energy Ltd (updated - 02 Dec 2009)
Suzlon Energy’s share price, which slipped from a high of Rs 145.80 in June 2009 to a low of Rs 55 in early November on account of poor results, delay in debt restructuring and lower order guidance, has gained 16 per cent in the last few days on the back of a mega order win. While the news flow at the counter has been positive in the last one month, experts believe some of the key concerns are subsiding.

Among the important developments was the company’s announcement on November 27 that its 91 per cent German subsidiary, REpower, has bagged an order to deliver 954 Mw of equipment for five wind power projects in Canada. This is the largest onshore order in REpower’s history, and comes on the back of a 62 Mw of orders bagged by Suzlon in early November, which takes the total order wins to 1,000 Mw in the month.

The mega order guarantees Suzlon a minimum purchase of 748 Mw for deliveries between 2011 and 2015 and has an option for purchase of additional 206 Mw. Analysts say that as the markets are improving and access to money is becoming easier in some of the key wind-power markets, Suzlon was able to win several new projects recently.

And, should the order trend remain buoyant, it would spell good news for Suzlon. Given that the company is operating at below 50 per cent of its capacity, the orders would help it report higher revenues and bounce back to profitability.

Last month, Suzlon sold 35.22 per cent of its stake in Hansen for $370 million or Rs 1,700 crore; it now holds 26.06 per cent. Although analysts were expecting the valuations to be higher, the sale would help repay some of its net debt of Rs 12,500 crore and reduce Suzlon’s interest cost by 15 per cent in 2010-11.

Analysts believe that any positive development regarding restructuring of the remaining debt, which is expected by December, would provide further comfort. Among various terms of deal, the company is seeking a moratorium of two years for repayments of its debt.

Meanwhile, for the six months ended September 2009, Suzlon reported an 11 per cent decline in revenues and net loss of Rs 770 crore. Analysts expect the company to report sales to decline 9-10 per cent while net loss could hover between Rs 500 and 700 crore for 2009-10. They expect 2010-11 to be better, with Suzlon likely to report an EPS of Rs 4 per share. At Rs 81.10, the PE works out to 20 based on 2010-11 estimated earnings. Analysts believe that since the risk-reward equation is not favourable currently, longterm investors may consider the stock on declines.
source - BS

Suzlon Energy Ltd (updated - 22 Dec 2009)
Suzlon Energy announced last week the repayment of its entire outstanding acquisition loan facility of about $780 million. The repayment was funded through the sale of Suzlon’s stake in Hansen Transmissions International NV and a new five-year dollar denominated loan of $465 million from the State Bank of India. Effectively, its consolidated net debt is now lower by roughly $350 million or Rs 1,700 crore.

Although the move is positive, the company’s total debt has come down by just 15 per cent, and at Rs 12,000 crore, its debt-equity ratio is still high at 1.1 times. Post the loan repayment, the company will be able to save up to Rs 150 crore in interest costs annually, which is not significant when compared to the total interest costs of Rs 1,053 core in 2008-09. Notably, the company continues to work towards restructuring of its debt, which put together should ease its liquidity concerns going ahead.

Meanwhile, Suzlon had divested 35.22 per cent stake in Hansen for $370 million in November 2009, which brought down its share in the company to 26.06 per cent.

While the company has used these funds for part payment of its debt, Hansen is no longer its subsidiary. Hence, its performance will not be consolidated with Suzlon’s financials going ahead. Given that Hansen had reported revenues of Rs 1,957 crore (a fifth of the company’s consolidated revenues) and operating profit of Rs 114 crore for the first half of 2009-10, Suzlon’s financials will be impacted to that extent.

On the positive side, the company’s business outlook has improved, albeit marginally, and there are signs of demand picking up in the key markets like the US and Europe. Suzlon’s Germanybased wind turbine manufacturing subsidiary, REpower Systems AG, recently bagged its largest ever onshore order for supplying equipment worth 954 Mw.

For the year ending March 2010, analysts expect Suzlon to report a decline of about 20 per cent in consolidated revenues, which they expect will only improve next year. The company had reported a cash loss of Rs 419 crore (net loss of Rs 770 crore) in the first half of the current financial year. But, with the business environment looking up, and considering that Suzlon has written-off most of the customer claims arising out of the sale of faulty blades, it should end the current year with a small profit. Thereafter, analysts expect its profitability to improve sharply; they have estimated consolidated earnings per share (EPS) of about Rs 1.3 for 2009-10 and Rs 5.5 for 2010-11.

The markets, however, don’t seem excited by the developments given that the stock has fallen by 2.6 per cent post the loan repayment announcement, as against the Sensex’s 1.7 per cent decline. At Rs 80.75, the stock is trading at 15 times its estimated 2010-11 earnings.
source - BS