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Suzlon Energy – Q2 Absolutely Powerless + Darker

November 3, 2009

Green Energy Infrastructure Company, Suzlon’s 2Q FY10 continued to disappoint, with shipments much lower than expected. At the Suzlon Wind level (parent level), 2Q FY10 wind shipments totalled 283MW, for a 1H FY10 figure of 406MW (17% of our FY10F estimate), and gross margin narrowed from 31% last quarter to 27%.

Suzlon had a disastrous 2QFY10 with Rec. Loss of Rs3.4bn vs Rec. PAT of Rs2.6bn in 2QFY09 and 3x BofAMLe. This was led by uneconomical operations resulting from dwindling backlog -41%, client driven push back in sales – 61%YoY fall in WTG volume (ex-REpower) and 1.4x rise in interest cost.

Management guided that for Suzlon Wind to break-even at the PBT level, shipments of 2,000MW are required. As for guidance for the subsidiaries, Repower is expected to contribute sales of €1.4bn and an EBIT margin of 7.5%, whereas flat volumes are expected at Hansen for FY10F. Suzlon is proactively aiming to fix the debt repayment challenge by asking for a 2 year moratorium in its new US$2.4bn debt refinancing plan.

Suzlon Energy is expected to report an EPS of Rs 2.5 and Rs 4.5 for FY10 and FY11 respectively.

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