FORTUNE INTERFINANCE LTD (FIFL)
1
Member of National Stock Exchange of India Ltd & Bombay Stock Exchange Ltd, SEBI Regd No. INB231243230 (NSE-Capital Market Segment) INF231243230 (NSE- Derivative Market Segment) INB011243236 (BSE-Capital Market Segment)
Company: Suzlon Energy Ltd.
BSE Scrip Code: 532667
NSE Scrip Code: 12018
CMP(Rs): 54
Face Value(Rs): 2
Book Value(Rs): 42
Target: Rs 101
Time Horizon: 2 years
Market Cap(Rs): 83 bn
Market Cap(USD): 1.84 bn
Type: Value buy
Nifty: 4987
52 week H/L: 132/53
Date: 8 June 2010
2
Suzlon Energy
Index
•Company Profile……………………………………………………………………….…….………...…….3
•Segment Presence……………………………………………………………………...…………………...4
•Price-Volume Chart…………………………………………………..…………………………...…………5
•Financials(Annual)………………………………..………………………………………...……………….6
•Financials(Quarterly)……...…………………..………………………………………………….…..........7
•Ratio Analysis…….………….…………………………………………………………………….………...8
•Annexure…………………..……..…………………………………………………………………..…........9
•Management Discussions………….……………………………………………………………..…..…..10
•Production Facilities………….…………………………………………………………………...............11
•Order Book….………………………………………………………………………………………............12
•Debt Structure…………………………………………………………………………………...……….....13
•FCCB’s Conversion………………………………………………………………………………………...14
Suzlon Energy
•Founded in 1995, Suzlon Energy is the largest Wind
Turbine Generator (WTG) manufacturer in India and third
largest globally, with a domestic market share of 69% and
12.3% globally.
•It also manufactures gearboxes, rotor blades and control
panels through its various subsidiaries.
•The company’s capacity on a standalone basis as on April
2009 is 4200 MW and has planned to increase to 5700
MW.
•The company holds 90.7% stake in REpower Systems
AG and 26.06% stake in Hansen Transmissions.
•The market cap is Rs 83.5 bn at a CMP of Rs 54 as on 8th
June, 2010.
Company Profile
Latest News Shareholding Patten (Mar 2010)
•01June,2010: Suzlon has fixed 10th June 2010 as the
record date for the right issue of 2:15 at Rs 63 per share.
•07May,2010: Suzlon is in advanced talks with London
based Swraj Paul’s Caparo Group to build 3000 MW wind
farm over 6 years, which may bring around USD 3 bn to it.
•05May, 2010: Suzlon Green Power Ltd.(subsidiary) to
invest Rs 300 cr. In 50 MW wind farm in Andhra Pradesh.
•23April,2010: Suzlon Wind Energy(subsidiary) has set up
J.V with Volkswind Bulgaria.
Board of Directors
Source: FIFL Research, Annual Reports, BSE, Economic Times
53.1%
13.6%
6.2%
27.1%
Promoters FII DII Others
3
Name Designation
Mr.Tulsi.R.Tanti Chairman & M.D. & CEO
Mr.Girish.R.Tanti Executive Director
Mr.Ajay Relan Independent Director
Mr.Ashish Dhawan Independent Director
Mr.V.Raghuraman Independent Director
Mr.Robin Banerjee CFO
Suzlon Energy
Segment Presence
•Suzlon has its presence mainly in the WTG
manufacturing segment and has gone for backward
integration through acquisition of several companies like
RE power and Hansen Transmission Systems.
•Suzlon also provides end to end wind power solutions
and builds turnkey projects.
•It sold 2790 MW in 2008-09, an increase of 20.72% over
last year.
•Its average realization is Rs 54.3 mn/MW domestically
and 54.9mn/MW internationally as on Jan 2010.
•Global Wind Energy installed capacity in 2008-09
reached 120.8 GW up 28.8% from last year.
Revenue Distribution (WTG sales)
Domestic Market Share World Market Share
69%
13%
10%9%
Suzlon Vestas Vestas RRB Others
28%
33%7%
16%
15%
India USA China Europe Australia
11%9%
9%
13%
12%9%
37%
Suzlon Gamesa Eneron(GE)Vestas GE Wind(US) SinovelOthers
Source: FIFL Research, Annual Reports 4
Source: FIFL Research, Annual Reports, BSE
Suzlon Energy
Price-Volume Chart Our Recommendation
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• Suzlon Energy posted disappointing results for the
FY2010 on account of higher operating costs and
interest payments. Going forward, we expect the
company to reduce its debt burden and focus on
improving its operating margins.
• The current order book of Suzlon stands at 3190 MW
and we expect the company to diversify its focus from
Europe to USA & China in coming two years.
Valuation
At current CMP of Rs 54, the stock is trading at a 2 year
forward P/E multiple of 6.4 with an EPS expectation of
Rs 8.43 in FY2012. We initiate our coverage with a
“BUY” on the stock with the price target of Rs 101 with a
time horizon of two years.
Risk
• The company has significant presence in Europe
through its subsidiary Repower. If the company fails to
diversify its businesses from Europe then we can see a
potentials correction in the EPS to the extent of 25%.
• The company have a huge debt burden on its books.
The management guidelines suggest that they would
focus on debt reduction through right issues. If company
fails in the reduction of debt then it may affect the
financials of the company and vary from our forecasts.
Suzlon Energy
Financials (Rs mn) Forecasted Financials (Rs mn)
Source: FIFL Research, Annual Reports, Ace Equity
Balance Sheet (Rs mn) Forecasted Balance Sheet (Rs mn)
Particulars 2007A 2008A 2009A
Share Capital 34,129 80,936 85,238
Share Warrants 1,007 102 1,054
Net worth 35,136 81,038 86,292
Minority Interest 141 10,244 23,135
Total Debt 51,620 99,346 148,696
Def Tax liability 1,804 2,713 5,170
Capital Employed 88,701 193,341 263,293
Fixed Assets 36,195 45,680 132,814
Capital W.I.P. 4,537 11,197 19,840
Net current Assets 46,187 102,551 107,286
Deferred tax Assets 1,627 2,495 3,302
Investments 156 31418 51
Total Assets 88,701 193,341 263,293
Particulars 2010E 2011E 2012E
Share Capital 65,856 62,061 75,183
Share Warrants - - -
Net worth 65,856 62,061 75,183
Minority Interest 10,496 10,500 18,500
Total Debt 97,650 91,431 90,600
Def Tax Liability 4,698 4,362 5,676
Capital Employed 178,701 168,354 189,962
Fixed Assets 62,338 58,728 71,236
Capital W.I.P. 6,234 5,873 7,195
Net current assets 108,343 102,070 109,632
Def Tax Assets 1,787 1,684 1,900
Investments - - -
Total Assets 178,701 168,354 189,962
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Particulars 2007A 2008A 2009A CAGR
Net sales 79,857 136,794 260,817 48.4%
Gr (%) 107.9 71.3 90.7 -
EBITDA 14,164 22,538 32,403 31.8%
Gr (%) 48.5 59.1 43.8 -
Mar (%) 17.7 16.5 12.4 -
Interest 2,763 5,969 10,539 56.2%
Gr (%) 326.6 116.0 76.6 -
Depreciation 1,718 2,890 5,731 49.4%
Gr (%) 140.0 68.2 98.3 -
PAT 8,640 11,816 2,365 (35.1%)
Gr (%) 13.8 36.8 (80.0) -
EPS 6.01 7.89 1.58 (35.9%)
Gr (%) 13.8 31.3 (80.0) -
Particulars 2010A 2011E 2012E CAGR
Net sales 207,792 195,761 237,452 4.5%
Gr (%) (20.3) (5.8) 21.3 -
EBITDA 12,244 20,555 29,681 34.3%
Gr (%) (62.2) 67.9 44.4 -
Mar (%) 5.9 10.5 12.5 -
Interest 11,950 8,229 8,154 (12.0%)
Gr (%) 13.4 (31.1) (0.9) -
Depreciation 6,630 5,051 5,699 (4.9%)
Gr (%) 15.7 (23.8) 12.8 -
PAT (9,826) 6,031 13,122 210.1%
Gr (%) (515.5) (161.4) 117.6 -
EPS (6.31) 3.87 8.43 210.1%
Gr (%) (499.4) (161.3) 117.8 -
Source: FIFL Research, Ace Equity 7
Suzlon Energy
Quarterly Financials (Rs mn)
Particulars (Rs mn)H2 FY'10 Qtr Ended Mar'10 Qtr Ended Dec'09 H1 FY '10
Mar'10 Mar'09 Gr (%) Mar'10 Mar'09 Gr (%) Dec'09 Dec'08 Gr (%) Sep'09 Sep'08 Gr (%)
Gross Sales 116,736 160,430 (27.2) 60,836 91,213 (33.3) 55,900 69,217 (19.2) 89,460 100,387 (10.9)
Excise Duty - - - - - - - - - - - -
Net Sales 117,726 161,504 (27.1) 61,642 92,079 (33.0) 56,084 69,425 (19.2) 90,066 101,084 (10.9)
(Inc)/Dec in Stock 5,671 9,734 - (8,011) 10,912 - 13,682 (1,178) - (4,017) (20,595) -
Purchase of F.G. 355 132 168.03 306 116 164.2 49 17 194.5 123 94 30.6
Cost of Raw material 68,937 94,197 (28.2) 45,923 49,782 (37.5) 23,014 44,415 (15.1) 65,212 85,006 (5.0)
Operating & Manufacturing Exp. 25,019 29,492 (15.2) 13,849 16,796 (17.5) 11,170 12,696 (12.0) 15,607 14,711 6.1
Power & Fuel - - - - - - - - - - - -
Employee Cost 9,649 11,945 (19.2) 4,226 6,279 (32.7) 5,424 5,666 (4.3) 11,805 9,713 21.5
General Administration Exp - - - - - - - - - - - -
Selling & distribution Exp - - - - - - - - - - - -
Total Expenses 109,631 145,500 (24.7) 56,294 83,885 (32.8) 53,338 61,615 (13.4) 88,730 88,929 (0.2)
Operating Profit 8,095 16,004 (49.4) 5,348 8,194 (34.7) 2,746 7,810 (64.8) 1,336 12,155 (89.0)
OPM(%) 6.9 9.9 (30.6) 8.7 8.9 (2.5) 5 11 (56.4) 1 12 (87.6)
Other Income 345 4,641 (92.6) 170 4,165 (95.9) 175 477 (63.3) 416 1,108 (62.4)
EBITDA 8,440 20,646 (59.1) 5,519 12,359 (55.3) 2,921 8,287 (64.7) 1,752 13,262 (86.8)
Depreciation 3,124 3,477 (10.2) 1,451 2,009 (27.8) 1,673 1,468 14.0 3,506 2,255 55.5
EBIT 5,316 17,169 (69.0) 4,068 10,350 (60.6) 1,248 6,819 (81.7) (1,755) 11,008 (115.9)
Interest 5,897 5,421 8.8 3,002 3,082 (2.6) 2,895 2,339 23.8 6,054 3,592 68.6
Exceptional Items 2,438 (6,918) (135.2) - (2,430) (100.0) 2,438 (4,489) (154.3) (385) (5,076) (92.4)
PBT 1,857 4,830 (61.5) 1,066 4,838 (77.9) 791 (8) (9,985.0) (8,193) 2,340 (450.2)
C.Tax 3,517 1,125 212.6 2,953 740 299.0 564 385 46.4 44 1,756 (97.5)
D. Tax - - - - - - - - - - - -
FBT - - - - - - - - - - - -
Prior Period/ yr Tax - - - - - - - - - - - -
PAT Before extra ordinary items (1,660) 3,705 (144.8) (1,887) 4,098 (146.0) 227 (393) (157.7) (8,238) 584 (1,511.0)
Extra ordinary Item - - - - - - - - - - - -
PAT after extra ord (1,660) 3,705 - (1,887) 4,098 - 227 (393) - (8,238) 584 -
Equity Capital 3,114 2,997 - 3,114 2,997 - 3,114 2,997 - 3,114 2,997 -
EPS (1) 2 - (1) 3 - 0.1 (0.3) - (5) 0.4 -
NPM (%) (1%) 2% (161.4) (3%) 4% (168.7) 0% (1%) (171.4) (9%) 1% (1,683.6)
Cost as a % of Sales 93.1% 90.1% - 91.3% 91.1% - 95.1% 88.8% - 98.5% 88.0% -
Con of Raw material 63.4% 64.4% - 61.5% 65.9% - 65.4% 62.3% - 67.9% 63.7% -
Employee Cost 14.0% 12.7% - 9.2% 12.6% - 23.6% 12.8% - 18.1% 11.4% -
Power & Fuel 0% 0% - 0% 0% - 0% 0% - 0% 0% -
Selling Exp 0% 0% - 0% 0% - 0% 0% - 0% 0% -
Operating Exp 36.3% 31.3% - 30.2% 33.7% - 48.5% 28.6% - 23.9% 17.3% -
Administrative Exp 0.0% 0.0% - 0.0% 0.0% - 0.0% 0.0% - 0.0% 0.0% -
Source: FIFL Research, Annual Reports
Suzlon Energy
Key Ratios Forecasted key ratios
KEY RATIOS 2007A 2008A 2009A
EBITDA (%) 17.7 16.5 12.4
ROCE (%) 14.0 10.2 10.1
RONW (%) 24.6 14.4 5.0
Sales/Total Assets (x) 1.1 1.4 1.0
Debt:Equity (x) 1.5 1.2 1.7
Current Ratio (x) 2.1 2.4 1.9
EV/Sales (x) 4.1 3.2 0.8
EV/EBITDA (x) 22.9 19.3 6.3
P/E (x) 33.3 33.4 26.9
P/BV (x) 8.4 4.9 0.7
Book Value (Rs) 24 54 57
KEY RATIOS 2010E 2011E 2012E
EBITDA (%) 5.9 10.5 12.5
ROCE (%) 3.1 9.2 12.6
RONW (%) (15.0) 9.7 17.5
Sales/Total Assets (x) 0.9 0.9 0.8
Debt:Equity (x) 1.5 1.5 1.2
Current Ratio (x) 1.8 2.1 2.2
EV/Sales (x) 0.6 0.7 1.1
EV/EBITDA (x) 10.6 6.9 8.8
P/E (x) (8.6) 13.9 6.4
P/BV (x) 1.3 1.4 1.1
Book Value (Rs) 42 40 48
Ratio Analysis
8
Suzlon Energy
9
Annexure
Source: FIFL Research, Annual Reports
Suzlon Energy
Management Discussion 2006 Management Discussion 2007
Management Discussion 2008 Management Discussion 2009
•During 2000-05 Suzlon grew at a CAGR of 64%
compared to industry growth of 26.3%.
•Focused towards vertical integration, took its first step
by setting up component manufacturing facility for Rotor
blades in 2001.
•Improved control over value chain by setting up suzlon
generators Pvt. Ltd. in J.V. with Elin EBG Motoren of
Australia.
•Setting up an integrated manufacturing plant in
Tianjin(China).
•Improved R&D footprint through a new innovation centre
at Denmark and a Technology campus in Germany.
•World Market share in 2006 grew to 7.7% from 6%.
•Domestic subsidiaries formed were SE Forge Ltd.,
Suzlon Wind International Ltd., Suzlon Rotor International
Ltd., Suzlon Towers International Ltd.
•Overseas subsidiaries formed were Suzlon Wind Energy
Ltd.(U.K).
•On 9 May,2006 AE Rotor Holding B.V.(wholly owned
subsidiary) acquired Eve Holding N.V.(Belgium)., a
holding company of Hansen Transmission.
•The company reduced process defects by 75%.
•It plans to expand international logistics to provide
custom made turnkey solutions and ease shipments from
various units.
•Suzlon has combined manufacturing capacity of 2700
MW annually & has plans for a 100% capacity addition.
•Acquired 33.85% stake in RE Power for Euro 453 mn.
And made agreement with Martifer for acquiring 23.08%
•It Raised USD 500 mn through zero-coupon convertible
bonds.
•Suzlon completed the acquisition of 91% stake in
Repower by acquiring 37.82%.
•It sold 10% stake in Hansen Transmission for Rs 6000
mn.
•It again sold 35.22% stake in Hansen for USD 370 mn on
24 Nov 2009, which reduced its debt by around 15%.
•SE Forge Ltd.(subsidiary) raised Rs 4000 mn from IDFC
PE firm.
•SETL(China), a subsidiary of Suzlon, to set up 100 MW
wind farm project funded by the World Bank.
10
Source: FIFL Research, Annual Reports, Company website
Suzlon Energy
Production Facilities
INDIA
Company Location Products
Capacity
(mw/yr.)
Rotor blades 924
Nacelles 924
Suzlon Energy Ltd. Pondicherry Nacelle covers 924
Control systems 924
Hubs 924
SE Electricals Ltd. Coimbatore Generators 3000
Control systems 3000
SE Composites Ltd. Padubidri Rotor blades 1500
Suzlon Wind
International Ltd. Padubidri Nacelles 1500
Nacelle covers 1500
Nose cones 1500
Suzlon Generators
Ltd Chakan Generators 2000
Suzlon Energy Ltd. Daman Rotor blades 1000
WTG Assembly 350
Nacelle covers 1200
Control systems 1200
Nacelles 375
Nacelles 1250
Nose cones
Suzlon Energy Ltd. Dhule Rotor blades 450
Tubular towers 450
SCL Vadodara CEC 4700
Suzlon Energy ltd. Bhuj Rotor blades 450
Suzlon Structures Pvt.
Ltd. Gandhidham Tubular towers 1000
CHINA
Company Location Products
Capacity
(mw/yr.)
Rotor blades 600
Nacelles 600
Suzlon Energy
Tianjin Ltd.Tianjin Nacelle covers 600
Control Panels 600
Hubs 600
Generators 600
Nose cones 600
USA
Company Location Products
Capacity
(mw/yr.)
Suzlon Rotor
CorporationPipestone Rotor blades 600
Nose cones 600
11
Source: FIFL Research, Annual Reports, Company Website
Suzlon Energy
Present Order Book Key Project Sites
State Total MW Key Project Sites
Tamil Nadu 1275
Sankeneri, Devarkulam,
Palladam
Karnataka 490
Kapathgudda, Hassan,
Jajikalgudda
Kerala 14 Agali
Andhra
Pradesh 8.5 Tirupati
Maharashtra 1350 Dhule, Sangli, Satara
Gujarat 876
Bhogat, Kutch, Kuchhadi,
Sanodar
Madhya
Pradesh 53 Ratlam, Dewas
Rajasthan 423
Soda-Mada, Sadiya,
Pohra
Suzlon Wind Energy
COUNTRY As on 30/10/09 As on 30/01/10
India (MW) 123 314
USA 582 511
China 475 440
ANZ 113 53
Europe 179 166
S.America 17 -
Total(MW) 1,489 1,484
Total(Rs mn) 82,860 81,280
12
Source: FIFL Research, Annual Reports
Suzlon Energy
Debt Structure
Debt Type (Rs mn) 2007A 2008A 2009A
Secured loan
12.5% secured redeemable non-cumulative
debentures - - 3,000
Term Loan 11,761.7 61,946 59,997
Working Cap. facility from banks & others 8,082 8,718 39,763
Vehicle loan 1 - 6
Total Secured (A) 19,844 70,664 102,766
Unsecured loan
Long Term
Zero coupon convertible bonds - 20,055 25,355
From Banks 21,887 811 141
From Other than banks 203 111 4,666
Capital from profit participation rights - - 675
Short Term
From Banks 967 7,686 14,431
From Others 20 19 662
Total Unsecured (B) 23,076 28,682 45,930
Total Debt (A+B) 42,921 99,346 148,696
13
Source: FIFL Research, Annual Reports, NSE 14
FCCB’s Conversion
Suzlon Energy
Zero-coupon
convertible bonds
USD 211.302 mn
Due date: June 2012
Conversion price is Rs
74.025 per share
7.50% Convertible bonds
USD 20.796 mn
Due date: October 2012
Conversion price is Rs
74.025 per share
7.50% Convertible
bonds
USD 35.592 mn
Due date: June 2012
Conversion price is
Rs 74.025 per share
Zero-coupon
Convertible bonds
USD 90 mn
Due date: July 2014
Conversion price is Rs
90.38 per share
Zero-coupon convertible
bonds
USD 121.368 mn
Due date: October 2012
Conversion price is Rs
74.025 per share
2012
2014
FORTUNE INTERFINANCE LTD (FIFL)
15
Name Designation Email Phone
Rajendra K Agarwal Director [email protected] 91-33-22101152
Abhishek Agarwal Director [email protected] 91-22-40232079
Sushil Sanganeria Branch Head [email protected] 91-33-22101152
Sumit Nandy Research Analyst [email protected] 91-22-40232079
Rajesh Kumar Research Analyst [email protected] 91-22-40232079
Praveen Rajput Senior Dealer [email protected] 91-22-40232080
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Member: National Stock Exchange of India Ltd & Bombay Stock Exchange Ltd, SEBI Regd No. INB231243230 (NSE-Capital Market Segment) INF231243230 (NSE-Derivative Market Segment) INB011243236 (BSE-Capital Market Segment)
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