Stock Idea - Suzlon Energy.

>> Saturday, November 8, 2008

Scrip - Suzlon Energy Ltd.
BSE Scrip Code -
CMP: - 70.70 Rs.
Market Cap: - 10583.08 Cr.
52 Week H/L: - 460.00 - 42.00

History -
This company was started in the year 1995 by Mr. Tulsi Tanti who was primarily in the textile business and was introduced to wind energy through a wind power project that he had commissioned for his textile factory. The first subscribers to the Memorandum were the family members and friends of Tulsi Tanti.
Later in the year they collaborated with a German Company sudwind to acquire technology to produce wind energy in India.

Business -
Key business as the name states is manufacturing of Wind turbine.
Generating electricity also is main business.

Result -
Suzlon Energy Q2 net profit dips by 95 pc.
Suzlon Energy Ltd., the embattled wind turbine maker, swung to a net loss of 1.3 billion rupees ($26 million) in the second quarter, hurt by foreign exchange losses and provisions related to problems with some of its blades cracking in the U.S.
Net profit declined by 95.22 per cent to Rs 16.98 crore during the second quarter ended Sep 30, over the net profit of Rs 355.56 in the corresponding period a year ago.
Suzlon's income was sharply lower than a 3.75 billion rupee net profit reported in the same quarter of 2007. Foreign exchange losses, due to a weakening Indian rupee, amounted to 2.3 billion rupees compared with a small gain in the year-ago quarter. The company also set aside 477.7 million rupees to cover potential compensation it may have to pay customers in the U.S. because of a series of blade failures.

The road ahead -
With an order book concentrated in the US, Suzlon Energy is likely to benefit from the tax credit renewal in the fastest growing wind energy market in the world.Sound low-cost manufacturing bases in India and China and access to higher end technology through acquisitions have provided the right grounds for Suzlon’s take-off as a leading wind energy company. Globally too, the stage appears set for steady ramp up in renewable energy sources, what with several nations setting targets to generate a certain percentage of their energy needs from this source.
A long-term perspective on the stock is a pre-requisite as the benefits of synergies arising from the Hansen and REpower acquisitions would accrue only over time. Meanwhile, the company could also be burdened with short-term challenges such as high debt and muted profit margins as a result of acquisitions.

Other Financial -
EPS and PE both are very low compared to the all times high.
Forex loss was due to unstable rupee and dollar.

Key Positive -
Wind energy is always in demand as it is Non Exhaustible source of energy.
Having good order book value.
Available at a dirt cheap rate.

Key Negative -
Results were not good profit dips by 95 pc.

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