Suzlon Energy Ltd. share price target

Suzlons 4QFY16 volumes of 443MW (in line with our estimates) put it back in the black, with an APAT of Rs 500mn. EBITDA margin at 14.1% appears low primarily owing to the revenue mix (lower OMS contribution with increasing WTG volumes).

We expect India?s wind installations to grow from ~2.3GW in FY15 to ~4.5GW by FY18E, which should improve volumes and ensure strong earnings growth at listed wind turbine players Suzlon and Inox. The recent correction provides an attractive entry point in both stocks. Reiterate BUY on Suzlon and initiate with BUY on Inox.

As expected, Suzlon reported dismal 4QFY15/FY15 results with an adjusted loss of Rs 6/24bn. However, FY15 results are not the true barometer (it includes Senvion financials) and Suzlon?s turnaround story will start from 1QFY16. With Rs 88bn coming in via fund infusion from DSA and Senvion sale, the company is out of the debt trap which it found itself over FY13-15.

Having faced multiple crises over FY09-14, we believe Suzlon is on the cusp of a turnaround. It has aggressively reduced debt from its heavily levered balance sheet by divesting its German subsidiary Senvion (for Euro 1bn) and via a preferential issue of Rs 18bn to Dilip Shanghvi and Associates (DSA).

Over the past few weeks, Suzlon has aggressively eliminated debt from its heavily levered balance sheet. First, it has divested its holding in Senvion (its German subsidiary) to raise a billion Euros. Second, in a swift affirmation of support for Suzlon, the promoters of Sun Pharma (Dilip Shanghvi and Associates, DSA) are picking up a 23% stake in Suzlon, via a preferential issue of 1 bn shares at Rs 18/sh

Investor's Delight - Suzlon Energy Ltd. (SEL) The Suzlon Group is one of the world's largest wind turbine supplier, in terms of cumulative installed capacity and market share, at the end of 2013. The...