Multi Baggers

Suzlon Energy

About the Company:

Suzlon is a market leader in India with a global footprint across Asia, Australia, Europe, Africa and North and South America. Over the past two decades, Suzlon has built and consolidated its presence in 19 countries, by installing over 14,800 MW of wind turbines globally. Suzlon's global wind installations help in reducing over 32 million tons of CO2 emissions every year. The Company has 14 manufacturing facilities spread across India, China (Joint Venture) and America.

The BIG BET

Suzlon is gaining its market share and the thrust is shifting to renewable energy. Suzlon has started looking into solar aspects too. Thus going forward with backup from Dilip Sanghvi & Associates the stock is going to gradually move up.

Suzlon can be an interesting bet from balance sheet perspective and prospective future rather than valuation front. An unnoticed article from newspaper reports on Suzlon signing 4000 MW with AP Telangana can be a big award and that should shift stock to another 10-15% upper range.

There are key triggers which we feel are more technical adjustment which can rerate stock by 30% before budget:
 
a) Going into budget expectation Renewable energy will be focus area . Thus it is a safe stock till budget where returns can be anywhere in between 15 to 30%.

b) Globally developed world giant discussion on green energy and thrust will be in Solar and Wind Energy.

c) Developments from Government side can be game changer for Suzlon.

The government has cleared the way for offshore wind energy development in waters up to a distance of 200 nautical miles within the Exclusive Economic Zones (EEZ) of the country.

Reports suggest Suzlon is already conducting techno-commercial feasibility study for an offshore project in the bay of Kutch (Gujarat). Offshore technology access should allow Suzlon to tap business potential in this segment making it one of the key sector beneficiaries.

Senvion divestment deal, Suzlon has access to Senvion's offshore technology (6.1MW turbine) for the Indian markets. Senvion is the third largest company by offshore wind installations in EU (c.7% cumulative EU offshore installation).

The Indian wind energy market is also set for a big leap as accelerated depreciation (AD) and generation based incentives (GBI) have been re-introduced. The NDA government has ambitious plans of adding 60GW over FY15-22.

As 25% of Suzlon's expenses are fixed in nature (FY16E), we expect a quantum jump in profits as volumes ramp up. We expect Suzlon to achieve Profit in FY16E (which implies 35% market share. This looks plausible, given the company's order book of 1,447MW. With a capacity of 3.6GW, Suzlon can further ramp up volumes without incurring significant capex.

Suzlon's proposed JV with DSA for setting up a 450MW wind farm is an attempt by the company to tap into the financial investor customer segment.The company intends to develop and sell off the assets thus created to such investors. If decent yields are achieved, such projects may be sold off at significant profits. Suzlon plans to keep a ready inventory of 500MW of such projects.

We recommend this stock to BUY at CMP Rs. 22.30 with a target price of Rs 29.5.

Disclosure (SEBI Registration Number for Aashish Tater:  INA300001206)
 
Stock Ownership - No

Stock traded in Last 30 days ( No trading or investment activities done) - No

Stock Recommended to Clients - Yes

Remuneration/Benefits received from company in 12 months - No

Merchant Banking Market Making activities / projects - No

Any arrangement with co. to affect the report write up - No