FORTUNE INTERFINANCE LTD (FIFL)

Company: Suzlon Energy Ltd.

BSE Scrip Code: 532667

NSE Scrip Code: 12018

CMP(Rs): 54

Face Value(Rs): 2

Book Value(Rs): 42

Target: Rs 101

Time Horizon: 2 years

Market Cap(Rs): 83 bn

Market Cap(USD): 1.84 bn

Type: Value buy

Nifty: 4987

52 week H/L: 132/53

Date: 8 June 2010

Member of National Stock Exchange of India Ltd & Bombay Stock Exchange Ltd, SEBI Regd No. INB231243230 (NSE-
Capital Market Segment) INF231243230 (NSE- Derivative Market Segment) INB011243236 (BSE-Capital Market Segment)

1
Suzlon Energy

Index

Company Profile......3

Segment Presence......4

Price-Volume Chart.....5

Financials(Annual)......6

Financials(Quarterly)................7

Ratio Analysis......8

Annexure..............9

Management Discussions.......10

Production Facilities................11

Order Book.............12

Debt Structure........13
FCCBs Conversion...14

2
Suzlon Energy

Company Profile Board of Directors

Founded in 1995, Suzlon Energy is the largest Wind
Turbine Generator (WTG) manufacturer in India and third Name Designation
largest globally, with a domestic market share of 69% and
12.3% globally. Mr.Tulsi.R.Tanti Chairman & M.D. & CEO

It also manufactures gearboxes, rotor blades and control

Mr.Girish.R.Tanti Executive Director
panels through its various subsidiaries.

The companys capacity on a standalone basis as on April Mr.Ajay Relan Independent Director
2009 is 4200 MW and has planned to increase to 5700
MW.
Mr.Ashish Dhawan Independent Director
The company holds 90.7% stake in REpower Systems
AG and 26.06% stake in Hansen Transmissions.
Mr.V.Raghuraman Independent Director
The market cap is Rs 83.5 bn at a CMP of Rs 54 as on 8th
June, 2010. Mr.Robin Banerjee CFO

Latest News Shareholding Patten (Mar 2010)

01June,2010: Suzlon has fixed 10th June 2010 as the Promoters FII DII Others
record date for the right issue of 2:15 at Rs 63 per share.
07May,2010: Suzlon is in advanced talks with London
based Swraj Pauls Caparo Group to build 3000 MW wind 27.1%
farm over 6 years, which may bring around USD 3 bn to it. 53.1%
6.2%
05May, 2010: Suzlon Green Power Ltd.(subsidiary) to 13.6%
invest Rs 300 cr. In 50 MW wind farm in Andhra Pradesh.
23April,2010: Suzlon Wind Energy(subsidiary) has set up
J.V with Volkswind Bulgaria.
Source: FIFL Research, Annual Reports, BSE, Economic Times 3
Suzlon Energy

Segment Presence Revenue Distribution (WTG sales)

Suzlon has its presence mainly in the WTG India USA China Europe Australia
manufacturing segment and has gone for backward
integration through acquisition of several companies like
RE power and Hansen Transmission Systems.
Suzlon also provides end to end wind power solutions 15%
28%
and builds turnkey projects. 16%
7%
It sold 2790 MW in 2008-09, an increase of 20.72% over 33%
last year.
Its average realization is Rs 54.3 mn/MW domestically
and 54.9mn/MW internationally as on Jan 2010.
Global Wind Energy installed capacity in 2008-09
reached 120.8 GW up 28.8% from last year.

Domestic Market Share World Market Share

Suzlon Gamesa Eneron(GE)
Suzlon Vestas Vestas RRB Others Vestas GE Wind(US) Sinovel
Others
9% 11%
10% 9%
37%
13% 9%

69%
13%
9%
12%

Source: FIFL Research, Annual Reports 4

Suzlon Energy

Price-Volume Chart Our Recommendation

No. of Shares Closing Price Suzlon Energy posted disappointing results for the
FY2010 on account of higher operating costs and
500 90,000
interest payments. Going forward, we expect the

Thousands
company to reduce its debt burden and focus on
450 80,000 improving its operating margins.

400 The current order book of Suzlon stands at 3190 MW

70,000 and we expect the company to diversify its focus from
350 Europe to USA & China in coming two years.
60,000
Valuation
300
50,000 At current CMP of Rs 54, the stock is trading at a 2 year
250 forward P/E multiple of 6.4 with an EPS expectation of
40,000 Rs 8.43 in FY2012. We initiate our coverage with a
200 BUY on the stock with the price target of Rs 101 with a
30,000 time horizon of two years.
150
Risk
20,000
100
The company has significant presence in Europe
50 10,000 through its subsidiary Repower. If the company fails to
diversify its businesses from Europe then we can see a
potentials correction in the EPS to the extent of 25%.
0 -
The company have a huge debt burden on its books.
19-Oct-05

19-Oct-06

19-Oct-07

19-Oct-08

19-Oct-09
19-Apr-06

19-Apr-07

19-Apr-08

19-Apr-09

19-Apr-10

The management guidelines suggest that they would

focus on debt reduction through right issues. If company
fails in the reduction of debt then it may affect the
financials of the company and vary from our forecasts.
Source: FIFL Research, Annual Reports, BSE 5
Suzlon Energy
Financials (Rs mn) Forecasted Financials (Rs mn)

Particulars 2007A 2008A 2009A CAGR Particulars 2010A 2011E 2012E CAGR
Net sales 79,857 136,794 260,817 48.4% Net sales 207,792 195,761 237,452 4.5%
Gr (%) 107.9 71.3 90.7 - Gr (%) (20.3) (5.8) 21.3 -
EBITDA 14,164 22,538 32,403 31.8% EBITDA 12,244 20,555 29,681 34.3%
Gr (%) 48.5 59.1 43.8 - Gr (%) (62.2) 67.9 44.4 -
Mar (%) 17.7 16.5 12.4 - Mar (%) 5.9 10.5 12.5 -
Interest 2,763 5,969 10,539 56.2% Interest 11,950 8,229 8,154 (12.0%)
Gr (%) 326.6 116.0 76.6 - Gr (%) 13.4 (31.1) (0.9) -
Depreciation 1,718 2,890 5,731 49.4% Depreciation 6,630 5,051 5,699 (4.9%)
Gr (%) 140.0 68.2 98.3 - Gr (%) 15.7 (23.8) 12.8 -
PAT 8,640 11,816 2,365 (35.1%) PAT (9,826) 6,031 13,122 210.1%
Gr (%) 13.8 36.8 (80.0) - Gr (%) (515.5) (161.4) 117.6 -
EPS 6.01 7.89 1.58 (35.9%) EPS (6.31) 3.87 8.43 210.1%
Gr (%) 13.8 31.3 (80.0) - Gr (%) (499.4) (161.3) 117.8 -

Balance Sheet (Rs mn) Forecasted Balance Sheet (Rs mn)

Particulars 2007A 2008A 2009A Particulars 2010E 2011E 2012E
Share Capital 34,129 80,936 85,238 Share Capital 65,856 62,061 75,183
Share Warrants 1,007 102 1,054 Share Warrants - - -
Net worth 35,136 81,038 86,292 Net worth 65,856 62,061 75,183
Minority Interest 141 10,244 23,135 Minority Interest 10,496 10,500 18,500
Total Debt 51,620 99,346 148,696 Total Debt 97,650 91,431 90,600
Def Tax liability 1,804 2,713 5,170 Def Tax Liability 4,698 4,362 5,676
Capital Employed 88,701 193,341 263,293 Capital Employed 178,701 168,354 189,962
Fixed Assets 36,195 45,680 132,814 Fixed Assets 62,338 58,728 71,236
Capital W.I.P. 4,537 11,197 19,840 Capital W.I.P. 6,234 5,873 7,195
Net current Assets 46,187 102,551 107,286 Net current assets 108,343 102,070 109,632
Deferred tax Assets 1,627 2,495 3,302 Def Tax Assets 1,787 1,684 1,900
Investments 156 31418 51 Investments - - -
Total Assets 88,701 193,341 263,293 Total Assets 178,701 168,354 189,962
Source: FIFL Research, Annual Reports, Ace Equity 6
Suzlon Energy
Quarterly Financials (Rs mn)
H2 FY'10 Qtr Ended Mar'10 Qtr Ended Dec'09 H1 FY '10
Particulars (Rs mn)
Mar'10 Mar'09 Gr (%) Mar'10 Mar'09 Gr (%) Dec'09 Dec'08 Gr (%) Sep'09 Sep'08 Gr (%)
Gross Sales 116,736 160,430 (27.2) 60,836 91,213 (33.3) 55,900 69,217 (19.2) 89,460 100,387 (10.9)
Excise Duty - - - - - - - - - - - -
Net Sales 117,726 161,504 (27.1) 61,642 92,079 (33.0) 56,084 69,425 (19.2) 90,066 101,084 (10.9)
(Inc)/Dec in Stock 5,671 9,734 - (8,011) 10,912 - 13,682 (1,178) - (4,017) (20,595) -
Purchase of F.G. 355 132 168.03 306 116 164.2 49 17 194.5 123 94 30.6
Cost of Raw material 68,937 94,197 (28.2) 45,923 49,782 (37.5) 23,014 44,415 (15.1) 65,212 85,006 (5.0)
Operating & Manufacturing Exp. 25,019 29,492 (15.2) 13,849 16,796 (17.5) 11,170 12,696 (12.0) 15,607 14,711 6.1
Power & Fuel - - - - - - - - - - - -
Employee Cost 9,649 11,945 (19.2) 4,226 6,279 (32.7) 5,424 5,666 (4.3) 11,805 9,713 21.5
General Administration Exp - - - - - - - - - - - -
Selling & distribution Exp - - - - - - - - - - - -
Total Expenses 109,631 145,500 (24.7) 56,294 83,885 (32.8) 53,338 61,615 (13.4) 88,730 88,929 (0.2)
Operating Profit 8,095 16,004 (49.4) 5,348 8,194 (34.7) 2,746 7,810 (64.8) 1,336 12,155 (89.0)
OPM(%) 6.9 9.9 (30.6) 8.7 8.9 (2.5) 5 11 (56.4) 1 12 (87.6)
Other Income 345 4,641 (92.6) 170 4,165 (95.9) 175 477 (63.3) 416 1,108 (62.4)
EBITDA 8,440 20,646 (59.1) 5,519 12,359 (55.3) 2,921 8,287 (64.7) 1,752 13,262 (86.8)
Depreciation 3,124 3,477 (10.2) 1,451 2,009 (27.8) 1,673 1,468 14.0 3,506 2,255 55.5
EBIT 5,316 17,169 (69.0) 4,068 10,350 (60.6) 1,248 6,819 (81.7) (1,755) 11,008 (115.9)
Interest 5,897 5,421 8.8 3,002 3,082 (2.6) 2,895 2,339 23.8 6,054 3,592 68.6
Exceptional Items 2,438 (6,918) (135.2) - (2,430) (100.0) 2,438 (4,489) (154.3) (385) (5,076) (92.4)
PBT 1,857 4,830 (61.5) 1,066 4,838 (77.9) 791 (8) (9,985.0) (8,193) 2,340 (450.2)
C.Tax 3,517 1,125 212.6 2,953 740 299.0 564 385 46.4 44 1,756 (97.5)
D. Tax - - - - - - - - - - - -
FBT - - - - - - - - - - - -
Prior Period/ yr Tax - - - - - - - - - - - -
PAT Before extra ordinary items (1,660) 3,705 (144.8) (1,887) 4,098 (146.0) 227 (393) (157.7) (8,238) 584 (1,511.0)
Extra ordinary Item - - - - - - - - - - - -
PAT after extra ord (1,660) 3,705 - (1,887) 4,098 - 227 (393) - (8,238) 584 -
Equity Capital 3,114 2,997 - 3,114 2,997 - 3,114 2,997 - 3,114 2,997 -

EPS (1) 2 - (1) 3 - 0.1 (0.3) - (5) 0.4 -

NPM (%) (1%) 2% (161.4) (3%) 4% (168.7) 0% (1%) (171.4) (9%) 1% (1,683.6)
Cost as a % of Sales 93.1% 90.1% - 91.3% 91.1% - 95.1% 88.8% - 98.5% 88.0% -
Con of Raw material 63.4% 64.4% - 61.5% 65.9% - 65.4% 62.3% - 67.9% 63.7% -
Employee Cost 14.0% 12.7% - 9.2% 12.6% - 23.6% 12.8% - 18.1% 11.4% -
Power & Fuel 0% 0% - 0% 0% - 0% 0% - 0% 0% -
Selling Exp 0% 0% - 0% 0% - 0% 0% - 0% 0% -
Operating Exp 36.3% 31.3% - 30.2% 33.7% - 48.5% 28.6% - 23.9% 17.3% -
Administrative Exp 0.0% 0.0% - 0.0% 0.0% - 0.0% 0.0% - 0.0% 0.0% -
Source: FIFL Research, Ace Equity 7
Suzlon Energy

Ratio Analysis

Key Ratios Forecasted key ratios

KEY RATIOS 2007A 2008A 2009A KEY RATIOS 2010E 2011E 2012E

EBITDA (%) 17.7 16.5 12.4 EBITDA (%) 5.9 10.5 12.5

ROCE (%) 14.0 10.2 10.1 ROCE (%) 3.1 9.2 12.6

RONW (%) 24.6 14.4 5.0 RONW (%) (15.0) 9.7 17.5

Sales/Total Assets (x) 1.1 1.4 1.0 Sales/Total Assets (x) 0.9 0.9 0.8

Debt:Equity (x) 1.5 1.2 1.7 Debt:Equity (x) 1.5 1.5 1.2

Current Ratio (x) 2.1 2.4 1.9 Current Ratio (x) 1.8 2.1 2.2

EV/Sales (x) 4.1 3.2 0.8 EV/Sales (x) 0.6 0.7 1.1

EV/EBITDA (x) 22.9 19.3 6.3 EV/EBITDA (x) 10.6 6.9 8.8

P/E (x) 33.3 33.4 26.9 P/E (x) (8.6) 13.9 6.4

P/BV (x) 8.4 4.9 0.7 P/BV (x) 1.3 1.4 1.1

Book Value (Rs) 24 54 57 Book Value (Rs) 42 40 48

Source: FIFL Research, Annual Reports 8

Suzlon Energy

Annexure

9
Suzlon Energy
Management Discussion 2006
During 2000-05 Suzlon grew at a CAGR of 64%
compared to industry growth of 26.3%.
Focused towards vertical integration, took its first step
by setting up component manufacturing facility for Rotor
blades in 2001.
Improved control over value chain by setting up suzlon
generators Pvt. Ltd. in J.V. with Elin EBG Motoren of
Australia.
Setting up an integrated manufacturing plant in
Tianjin(China).
Management Discussion 2008
The company reduced process defects by 75%.
It plans to expand international logistics to provide
custom made turnkey solutions and ease shipments from
various units.
Suzlon has combined manufacturing capacity of 2700
MW annually & has plans for a 100% capacity addition.
Acquired 33.85% stake in RE Power for Euro 453 mn.
And made agreement with Martifer for acquiring 23.08%
It Raised USD 500 mn through zero-coupon convertible
bonds.
Source: FIFL Research, Annual Reports
Management Discussion 2007
Improved R&D footprint through a new innovation centre
at Denmark and a Technology campus in Germany.
World Market share in 2006 grew to 7.7% from 6%.
Domestic subsidiaries formed were SE Forge Ltd.,
Suzlon Wind International Ltd., Suzlon Rotor International
Ltd., Suzlon Towers International Ltd.
Overseas subsidiaries formed were Suzlon Wind Energy
Ltd.(U.K).
On 9 May,2006 AE Rotor Holding B.V.(wholly owned
subsidiary) acquired Eve Holding N.V.(Belgium)., a
holding company of Hansen Transmission.
Management Discussion 2009
Suzlon completed the acquisition of 91% stake in
Repower by acquiring 37.82%.
It sold 10% stake in Hansen Transmission for Rs 6000
mn.
It again sold 35.22% stake in Hansen for USD 370 mn on
24 Nov 2009, which reduced its debt by around 15%.
SE Forge Ltd.(subsidiary) raised Rs 4000 mn from IDFC
PE firm.
SETL(China), a subsidiary of Suzlon, to set up 100 MW
wind farm project funded by the World Bank.
10
Suzlon Energy
Production Facilities

INDIA CHINA
Capacity
Company Location Products (mw/yr.) Capacity
Rotor blades 924 Company Location Products (mw/yr.)
Nacelles 924 Rotor blades 600
Suzlon Energy Ltd. Pondicherry Nacelle covers 924 Nacelles 600
Control systems 924
Hubs 924 Suzlon Energy
Tianjin Nacelle covers 600
SE Electricals Ltd. Coimbatore Generators 3000 Tianjin Ltd.
Control systems 3000
SE Composites Ltd. Padubidri Rotor blades 1500 Control Panels 600
Suzlon Wind Hubs 600
International Ltd. Padubidri Nacelles 1500 Generators 600
Nacelle covers 1500 Nose cones 600
Nose cones 1500
Suzlon Generators USA
Ltd Chakan Generators 2000
Capacity
Suzlon Energy Ltd. Daman Rotor blades 1000
Company Location Products (mw/yr.)
WTG Assembly 350
Nacelle covers 1200 Suzlon Rotor
Control systems 1200 Pipestone Rotor blades 600
Corporation
Nacelles 375
Nacelles 1250 Nose cones 600
Nose cones
Suzlon Energy Ltd. Dhule Rotor blades 450
Tubular towers 450
SCL Vadodara CEC 4700
Suzlon Energy ltd. Bhuj Rotor blades 450
Suzlon Structures Pvt.
Ltd. Gandhidham Tubular towers 1000
Source: FIFL Research, Annual Reports, Company website 11
Suzlon Energy

Present Order Book Key Project Sites

Suzlon Wind Energy State Total MW Key Project Sites

COUNTRY As on 30/10/09 As on 30/01/10

Sankeneri, Devarkulam,
Tamil Nadu 1275 Palladam
India (MW) 123 314

Kapathgudda, Hassan,
USA 582 511 Karnataka 490 Jajikalgudda

Kerala 14 Agali
China 475 440
Andhra
Pradesh 8.5 Tirupati
ANZ 113 53
Maharashtra 1350 Dhule, Sangli, Satara
Europe 179 166
Bhogat, Kutch, Kuchhadi,
Gujarat 876 Sanodar
S.America 17 -
Madhya
Pradesh 53 Ratlam, Dewas
Total(MW) 1,489 1,484

Soda-Mada, Sadiya,
Total(Rs mn) 82,860 81,280 Rajasthan 423 Pohra

Source: FIFL Research, Annual Reports, Company Website 12

Suzlon Energy

Debt Structure

Debt Type (Rs mn) 2007A 2008A 2009A

Secured loan
12.5% secured redeemable non-cumulative
debentures - - 3,000
Term Loan 11,761.7 61,946 59,997
Working Cap. facility from banks & others 8,082 8,718 39,763
Vehicle loan 1 - 6
Total Secured (A) 19,844 70,664 102,766
Unsecured loan
Long Term
Zero coupon convertible bonds - 20,055 25,355
From Banks 21,887 811 141
From Other than banks 203 111 4,666
Capital from profit participation rights - - 675
Short Term
From Banks 967 7,686 14,431
From Others 20 19 662
Total Unsecured (B) 23,076 28,682 45,930
Total Debt (A+B) 42,921 99,346 148,696

Source: FIFL Research, Annual Reports 13

Suzlon Energy
Zero-coupon
convertible bonds
USD 211.302 mn
Due date: June 2012
Conversion price is Rs
74.025 per share
Source: FIFL Research, Annual Reports, NSE
FCCBs Conversion
2012
7.50% Convertible Zero-coupon convertible 7.50% Convertible bonds
bonds bonds USD 20.796 mn
USD 35.592 mn USD 121.368 mn Due date: October 2012
Due date: June 2012 Due date: October 2012 Conversion price is Rs
Conversion price is Conversion price is Rs 74.025 per share
Rs 74.025 per share 74.025 per share
2014
Zero-coupon
Convertible bonds
USD 90 mn
Due date: July 2014
Conversion price is Rs
90.38 per share
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FORTUNE INTERFINANCE LTD (FIFL)

Team
Name Designation Email Phone
Rajendra K Agarwal Director rk.agarwal@fifl.co.in 91-33-22101152

Abhishek Agarwal Director a.agarwal@fifl.co.in 91-22-40232079

Sushil Sanganeria Branch Head s.sanganeria@fifl.co.in 91-33-22101152

Sumit Nandy Research Analyst s.nandy@fifl.co.in 91-22-40232079

Rajesh Kumar Research Analyst r.kumar@fifl.co.in 91-22-40232079

Praveen Rajput Senior Dealer p.rajput@fifl.co.in 91-22-40232080

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Regd & Corp Office: 19, British Indian Street, Ground Floor, Flat No.2&3, Kolkata 700 069 Tel: 91-33- 22101152/1154, Fax: 91-33-22101153

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Member: National Stock Exchange of India Ltd & Bombay Stock Exchange Ltd, SEBI Regd No. INB231243230 (NSE-Capital Market Segment) INF231243230 (NSE-
Derivative Market Segment) INB011243236 (BSE-Capital Market Segment)

15