Disappointing H1 FY10 results
Suzlon’s consolidated 1H FY10 revenue was INR89bn, down 11% y-y. Suzlon Wind only delivered 406MW of wind turbines in 1H FY10. Suzlon consequently lowered FY10 shipment guidance to 1,900-2,100MW from 2,400-2,600MW.
Over the past few months, some positive policy developments have taken place in Suzlon’s key markets: US, India, China and Australia. While we do not expect these to translate into real business momentum in the near term, we are more positive about our current assumption of a 32% y-y shipment growth (2,500MW) in FY11.
Suzlon’s net debt to equity ratio reached 160% by September 2009. Suzlon continues to work towards de-leveraging the balance sheet and reducing absolute debt levels through the planned sale of Hansen, refinancing its current debt and fund infusion from promoters. Based on our downward earnings revision, we believe Suzlon runs a risk of not meeting its debt covenants, but management noted that the penalty may only result in slight increase in interest rates.
We expect share price weakness due to poor 1H FY10 results, reduced guidance and risks on order intake. However, we are positive about Suzlon’s long-term potential given our bullish view on the wind power industry.
Investors may avoid this scrip till the management comes out with a clear picture. However, the traders can still look for the technicals to make gain from short term price movements.
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