Citigroup which upgraded the stock of Suzlon Energy with a price target of Rs 1,700 in June, has upgraded the stock again with a new target price, on the back of major orders and clear earnings visibility.
Suzlon delivered 1,000MW in 1HFY08 and is set to deliver 1,500+MW volumes in 2HFY08. Delivery of higher volumes in 2HFY08 should lead to better fixed cost apportioning resulting in WTG margins improving to 16.1% levels for the full year.
The average annual WTG market looks set to jump to 26GW/year over the next 5 years vis-a-vis 10GW/year over the previous 5 years. Suzlon being one of the most vertically integrated WTG suppliers is well placed to leverage on this growth.
Suzlon can now discount at a higher P/E multiple of 26 and rolling forward to FY09 earnings, BUY Suzlon with a target price of Rs 2,227. Suzlon is expected to report an EPS of Rs 47.55 and Rs 69.54 for FY08 and FY09 respectively.