Suzlon needs to be watched for Q4 ... stay invested

Suzlon needs to be watched for Q4 ... stay invested


Some extracts of discussions ... just to highlight various aspects if you decide ti invest

Suzlon is for those who dare to dream big. TT is a shining example and role model for survival and hard work. First of its kind in India on this scale, i suppose. i do not recall an equivalent. May be some one with better knowledge can correct me.

It already has 25 percent market share as of FY16. With the present order book which already crossed that 25 percent of projected 4GW market for FY17, it should only improve.

YoY, there was a 100 percent increase in executions in India. For the next year, the projection by management (My Sim Memory...) is 40 percent growth. That matches my level of 1400MW. So you can say this is an optimistic outlook. Conservatively, will they do less than FY16? I doubt it very much. Matching FY16 also is ok with lesser interest burden. 

Working capital financing should be job based and procuring or servicing the same is not a concern as such. ROE, ROCE etc. sound Latin to me. Forgot most of that baggage in the Insti.

For a long term investors, should i repeat my views which are more widely known that TT`s views? Add below 15. Sell above 18 and 22. HOLD above 22 at your own risk. This risk is of losing the gain rather than making a loss.

Another simple arithmetic for those interested. This is like a home work.

Target for the country in WIND FY 17 - 4000MW
Suzlon Order Book (Back Log for FY17) - 1000MW (approx.)
So it is nearly at 25 percent on sales.

Now, has the entire market got 3GW orders for FY17, excluding Suzlon ? If they have not, the chances are Suzlon will increase its market share say by 25 percent of the pending from 4GW total(to be finalized deals). Government will ensure that 4GW orders are issued either from PSUs or other methods well known.

after 6 Quarters, Suzlon will surely be trading above 100 rupees. There is a flaw here. CMP usually reflects the future expectations and present troubles. Averaging and doubling it are 2 serious mistakes, even for approximation.

1. Capacity in 1995 and turnover then would have been quite meager. Today its manufacturing capacity is 4000MW per year. India`s target for FY17 is 4000MW. So where is 860MW (twice 430MW that you mentioned)? We know that it did just that figure in Indian markets last year. That should not be applied linearly. That would be ignoring the present day circumstances completely(Policy, Funding, Preparedness, Orders, Execution).

2. Why did you double ? Because you thought 430MW is very low. By the same token, there are some who think even your 860MW projection should be doubled. If they happen to be right, there will be clues in this quarter itself.

My conclusion: While you wait for 3 quarters, price gets going. You can not enter at 18 or 20. My targets, if you noticed, should be read together with the developments in the company. Suzlon will be a runaway hit very soon. Can`t tell you how soon. But surely not 3 quarters.

Also, first forced conversion is above 30. Not 27. This applies until July 2017. After that the same comes down to near 25. This is for compulsory conversions only and does not apply to normal conversions which can happen all the time and any time of the bond holder`s choice. Price will look good for conversion above 18. 22 was the place where the price took some support during the last fall. So key levels to watch are 18, 22, 25, 29. Fall can start once the price hits any of these targets. Only reasons will be different in each case.

if you are looking for short term, you will see 22 in the next 3 months at least once.

TT mentioned that the company execution improved by 100 percent, we must realize that the situation WAS pathetic. Just coming back to normal, now. Not a reason to jump with joy. (Let us just assume, with the same total as FY16 was, Suzlon would have executed under 12 percent of total WIND INDIA of FY15). Compared to that FY16 was better.

Reasons can be many. The beginning of FY15 when Suzlon was struggling for working capital, the policy uncertainty also was there. So FY16 was an improvement probably for all companies. In that, if Suzlon could cut 25 percent, it was an achievement. 

Target should be 36 to 40 percent for FY17. But that may not be possible considering the new players and capacity expansion of existing players. Of course, Suzlon certainly has an edge over every one else in the market. So 30 to 35 percent is achievable. And that would mean a lot to EPS. SO on forward earnings basis, 40 to 60 seems realistic. The key is Q4.

It makes sense to jump in before others do. But the trend is amply clear for me. i personally look at Q4 to assess the rosy talk and not the hard work they are doing at base level to achieve decent results and get over the debt issues.

after 2 to 3 good quarters, everything will be priced in and you would get it not below 40. Look at Inox. It trades above 200. Why ? Just EPS. Every one know debt is inevitable in a capital intensive business like this.

Make your own due diligence and invest

Happy investing