Report on Suzlon Energy Ltd

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Report on Suzlon Energy Ltd

  1. 1. OverviewCompany ProfileConceived in 1995 with just 20 people, Suzlon is now a leading wind power company with: · Over 14,000 people in 21 countries · Operations across the Americas, Asia, Australia and Europe · Fully integrated supply chain with manufacturing facilities in three continents · Sophisticated R&D capabilities in Denmark, Germany, India and The Netherlands · Market leader in Asia and 3rd largest wind turbine manufacturer in the world, Suzlon Market Share (Combined with REpower) rose to 12.3% thereby making Suzlon 3rd largest wind turbine manufacturing company in the world · Listing : BSE and NSE (India), part of S&P CNX Nifty IndexINDIAMarket Overview · India ranks 3rd worldwide in terms of total installed wind power · India is one of the few countries in the world to have a Ministry of New and Renewable Energy (MNRE) dedicated to promoting the use of clean, green and environment-friendly renewable energy · As per the assessment of CWET (Center for Wind Energy Technology, a Government of India undertaking), the harnessable wind power potential in India is over 45,000 MW, spread over 13 States & Union Territories · As per Ministry of New and Renewable Energy (MNRE) data, the cumulative wind power installed capacity in India exceeded 10000 MW as on March 2009 · India has emerged as a hub of wind turbine manufacturing, with a capacity of over 3000 MW per annum · Wind turbine technology has been greatly indigenized, and is robust and mature · Progressive policies, regulatory support, Progressive policies & regulatory support such as Renewable Power Obligation (RPO), Generation Based Incentives ( GBI), Prime
  2. 2. Ministers National Action Plan on Climate and fiscal incentives for private investors have been driving the growth of wind power in India · Other attractive policy initiatives such as REC, TTC are also on the anvil by the GoI · Going forward, the market is expected to witness the emergence of large scale development propelled by local and international Independent Power Producers (IPPs), on similar lines as other major global markets · As per Ministry of New and Renewable Energy (MNRE), a target of 14000 MW from Grid Interactive Renewable power has been planned for 11th Five Year Plan period (2007 to 2012); of this, 10,500 MW will be generated from windFinancialsThe wind industry has enjoyed a period of uninterrupted growth of 34% CAGR over the past 5years. To outline our consolidated performance as a group for the first 9 months of the financialyear 2009, our revenue grew from 8,756 crores rupees to 17,277 crores of rupees, a growth of 97%.The world is now looking for the energy security with the governments, looking to diversify energysource, to mitigate the geopolitical risk around oil and gas supplies.Scrip code: BSE 532667, NSE SUZLON, Bloomberg SUEL IN, Reuters SUEL.BOFinancial RemodellingSuzlon undertook a Liability Management exercise for the existing USD 500 million ForeignCurrency Convertible Bonds. The debt covenants have been modified and redefined. There hasbeen a reduction in liability by USD 111 million through buyback and exchange mechanism.Suzlons endeavour to continue consolidating their financial and business structure in FY 2009-10.Focus will be on continuous reduction in the intensity of working capital deployment and inherentreduction of the quantum of debts.
  3. 3. Key IndicatorsKey Indicators as on 21/01/2010 Closing Price (Rs.) 82.95 EPS (Rs.) -6.181733008 P/E -13.41856724 BV per Share (Rs.) 42.79189417 PB 1.938451233 Mkt Cap (Rs. Crore) 12913.08981 Beta 1.597 Returns 1 mth % -1.367419738 Returns 12 mth % 66.39919759 Exc ret over Nifty (12 mths) -21.84424789 Yield % 0 Shares outstanding 1,55,67,31,743 Avg. daily vol. (30 days) (Rs. Crore) 72.16542332 Share holding (%) 01-12-2009 Promoters 53.08 Public 16.15 FIIs 15.52 Others 15.25Facts · As a result of dilution of effective stake of Suzlon in SE Forge and sale of stake in Hansen, there is an increase in net unrealised gain on dilution of Rs 203 crore · The increase in loan funds was primarily on account of loans taken for capital expenditure incurred in establishing Special Economic Zone (SEZ) based manufacturing facilities, increased working capital requirements and consolidation of REpower. Out of the total outstanding loan is towards REpower acquition and Rs 1,688 crore (11.3%) is on account of Hansen acquisition.
  4. 4. · The Company recorded a net deferred tax liability of Rs 187 crore as at March 31, 2009 as compared to Rs 22 crore as at March 31, 2008. · The net addition to capital expenditure amounting to Rs 4,335 crore (excluding goodwill) comprises of additions towards gross block of Rs 3,471 crore and Rs 864 crore towards increase in capital work in progress.InterpretationOperating Profit Margin (%)Operating Profit margin gives an idea of how much a company makes (before interest andtaxes) on each dollar of sales. When looking at operating margin to determine the quality ofa company, it is best to look at the change in operating margin over time and to comparethe companys yearly or quarterly figures to those of its competitors. In this case theoperating margin is decreasing. If a companys margin is decreasing, it is earning less perdollar of sales.Return On Capital Employed (%)ROCE should always be higher than the rate at which the company borrows, otherwise anyincrease in borrowing will reduce shareholders earnings. In this case it is decreasing and itsdefinitely affecting the shareholder value which can be seen from the EPSReturn on Assets (ROA)An indicator of how profitable a company is relative to its total assets. ROA gives an ideaas to how efficient management is at using its assets to generate earnings. Calculated bydividing a companys annual earnings by its total assets, ROA is displayed as a percentage.Sometimes this is referred to as "return on investment". In this case ROA has decreaseddrastically in 2009Net Working CapitalA company can achieve profitability but short of liquidity if its assets cannot readily beconverted into cash. Positive working capital is required to ensure that a firm is able tocontinue its operations and that it has sufficient funds to satisfy both maturing short-termdebt and upcoming operational expenses. In this case they have maintained positiveworking capital.Debt/Equity RatioIt indicates what proportion of equity and debt the company is using to finance its assets. Ahigh debt/equity ratio generally means that a company has been aggressive in financing its
  5. 5. growth with debt. In this case they have increases on Debt/Equity Ratio in the recent past asthey are trying to enter emerging marketsNet Cash used in Investing ActivityIn case of Suzlon Energy limited, the investing activity increases during the 2008/2009. Asthere is increase in investing activity there will be increase in the financing activity which isclearly visible from the cash flow statementTrend of Investment on fixed AssetThere is an increase in the fixed asset of the company which is clearly visible in theBalance Sheet. The rationale behind the increase in the fixed asset is that the company is agrowing company and there is lot of opportunity available in the market to expand. Inexpansion we need financing so there is an increase in financing activity and similarinvesting activity has increased to take advantage of the market scenario. All countries aresearching a suitable renewable energy source and it is one of the best in market inproviding solution to these sort of issuesSuzlon Energy Limited is also taking advantage of the mandate of Carbon gas emission tobe reduced by developed country. They are searching an opportunity to invest in renewableenergy in their country or in developing country to gain some carbon credits so that theycan reduce their Carbon Emission. This has definitely helped Suzlon to gain a good marketshare in different countries.
  6. 6. Market TrendMonthly
  7. 7. 6 month
  8. 8. Year
  9. 9. Profitability Trend
  10. 10. Capital Structure
  11. 11. Net Working Capital
  12. 12. Debt/Equity Ratio
  13. 13. Cash Flow
  14. 14. Dividend HistoryDividendHistoryYear Equity Dividend (%) Interim-I Interim-II Final Total1995- 0% 0% 25% 25%19961996- 0% 0% 20% 20%19971997- 0% 0% 20% 20%19981998- 15% 0% 15% 30%19991999- 40% 0% 60% 100%20002000- 20% 0% 80% 100%20012001- 40% 120% 0% 160%20022002- 50% 0% 0% 50%20032003- 30% 0% 70% 100%20042004- 40% 0% 20% 60%20052005- 25% 25% 50%2006
  15. 15. 2006- 50% 50%20072007- 50% 50%2008Cost of CapitalEquity Beta 1.5Risk free rate (%) 6.50%Equity risk premium (%) 4.50%Country risk premium (%) 0.50%Cost of equity (%) 14.80%Cost of debt (%) 10.00%Debt/capital (%) 20.00%Tax (%) 33.00%WACC (%) 13.20%Terminal growth rate (%) 1.00%Bonus and Split HistoryBonus History History of Bonus Shares Date Ratio 01-10-2000 1 share for every 2 2/26/2002 1 share for every 1 9/30/2003 1 share for every 1 9/25/2004 2 shares for every 1 6/24/2005 2 shares for every 1 Split History Announcement Old Face Value New Face Value Ex-Split Date Date 23-10-2007 10 2 21-01-2008
  16. 16. Recent Performance------- Adj closing price ------- Traded shares(Rs. Crore) 08-Jun 08-Sep 3 mths 3 mthsTotal Income 1496.28 2264.66 Net Sales 1473.24 2234.47 Other Income 23.04 30.19 Extra-ordinary Income 0 0Change in stock 115.51 94.18Expenditure 1523.75 2341.86 Consp. raw mat. 981.54 1473.59 Personnel cost 57.93 45.87 Other expenses 366.95 644.8 Extra-ordinary exp. 26.46 47.77PBDIT 178.91 146.81 Interest 38.2 76.69PBDT 140.71 70.12 Depreciation 21.71 24.49
  17. 17. PBT 119 45.63 Tax 30.96 28.65PAT 88.04 16.98Adjusted EPS (Rs.) 10.25184953 8.016884227Growth (%) Net sales 75.55499946 31.86059 Total expenses 64.14767096 62.35069014 PBDIT 31.09840991 -64.82666092 Interest 32.1799308 171.8539525 PBDT 30.80784605 -81.98263015 PAT -1.521252796 -95.2247033
  18. 18. Profitability (%) PBDIT/Total income 11.95698666 6.482650817 PBDT/Total income 9.403988558 3.096270522 PAT/Total income 5.883925468 0.749781424 PBDIT netof 13.94002335 8.708105278PE&OI/OpInc PBDT netof PE&OI/OpInc 11.34709891 5.275971483 PAT netof PE&OI/OpInc 6.20808558 1.546675498Price (Rs.) 215.9 152.25P/E 21.0596146 18.9911686
  19. 19. Mar-00 01-Mar 0 02-Mar 6 - M a r 12 mths 12 mths 1 12 12 mths mths 2 m t h sTotal income 155.1 395.5 3 541.05 8 5 7 . 7 4PAT net of P&E 26.44 83.31 8 103.64 2 1 . 6 7GFA 8.38 17.92 4 54.59 0 0 . 4 1Net Worth 53.88 132.73 2 225.34 8 2 2 . 2 5Borrowings 12.84 20.68 3 44.71 3 5 . 3 7PBDITA/Total 18.85880077 24.76611884 2 22.59125774income (%) 5 .
  20. 20. 7 8 3 4 8 9 8 2PAT netof P&E/Tot 18.52553219 21.48837917 2 20.91905692inc(%) 1 . 2 8 6 8 1 5 6RONW 66.63534938 90.76683993 4 62.24481247 3 . 7 7 5 5 5 4 2 6ROCE 58.30250719 88.56007529 4 58.63874346 0 . 1 2 7 9 3 0 1

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