Analysts’ pick: Suzlon Energy
Published on Wednesday, October 1st, 2008 at 4:36 AMAuthor: admin (5507 Articles)
Suzlon Energy
CMP: Rs 152.25
Target price: Rs 216
Citigroup Global Markets has maintained its ‘sell’ rating on the stock saying the company’s international expansion drive has taken its toll in the form of supply delays; tower shortages in the international markets; key component shortages; and negative effects of foreign currency movements and nacelle custom duty changes in the US.
According to Citi, medium-term commodity price increases; delays in Suzlon’s WTG capacity ramp-up; the possibility of PTC not being extended and further provisions for blade damage problems may weigh heavily on the stock’s performance.
“The target price is based on 17 times December ’09E EPS (earnings per share), the low end of Suzlon’s 05-08 P/E (price to earnings) range of 17-47 times, given concerns about Suzlon’s S88 WTG,†said Citi in a note to its clients.
“The recent EME (Edison Mission Energy) order cancellations and availability issues have taken the stock to its trough valuation of 17 times one-year forward earnings,†the note said.
“We do not expect a significant re-rating until the company comes clean on its S88 turbine blade damages issue and establishes that it has a credible product to service its endmarkets without product liabilities,†the Citi note added.
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