SUZLON VALUATION

SUZLON
• Largest wind turbine manufacturer in Asia and the 3rd largest
worldwide (Suzlon + Repower).

• End-to-end wind power solutions from assembly, installation to

commissioning. The company manufactures blades, generators.

• Suzlon was founded by Tulsi Tanti in 1995.

• Suzlon operates the largest wind park in the world, the 584 MW
wind park in the Western Ghats-Tamil Nadu.

• Planning to acquire remaining 9% stake in Repower.

 ACQUISITIONS DISINVESTMENTS SUBSIDIARY M&A

RE Power Systems (Aug REpower Systems AG

SE Forge ( Oct 2010)
2010) acquired PROASEGO
RE Power Systems Swibi AG (June 2010) Wind park (May 2010)
(Dec2009) Hansen Transmissions RE Power Systems Swiz
RE Power Systems AG (April 2009) acquired stake in Wind
(June 2009) Denker & Wulf AG- farm Corleto Perticara
Quitzow Wind (Mar (August 2010)
RE Power Systems AG
(June 2008) 2009)
AE-Rotor Techniek of
RE Power Systems AG Hansen Transmissions the Netherlands
(June 2007) (Jan 2009) acquired Eve Holding
NV, a manufacturer of
SE Forge (Oct 2008) wind turbines ( Mar
2006)
 • Enters Kerala with its first Wind Power Project
2007- • First S88-2.1 MW wind turbine is commissioned by Deco Light Ceramics Ltd, in Gujarat
08 • Hansen Transmission International N.V completes provisional listing of IPO on London Stock Exchange
• Signs up with ONGC Limited - for 51 MW wind turbine capacity

• Signs contract with Tierra Energy of Austin, Texas - for 42 units of the S88-2.1 MW wind turbine
• Commissioned its first 2.1 MW capacity turbine in Australia
2006- • Wins the Best PE/VC Backed Company Award from Venture Intelligence Apex
07 • Commissioned its first Wind Turbine Generator in China
• Signs contract with British Petroleum - for 40 MW in Maharashtra

• Market share in India crosses 50%

2005- • Ranked 5th in the world among Wind Turbine Generator manufacturers for capacity installed in 2005
2006 • announces strategic acquisition of Hansen Transmission International NV, Belgium

• Crosses 1 GW (1000 MW) installation mark (2004-05)

• Signs up MSPL's 3.75 MW Wind Power Project (2003-04)
• Suzlon Energy Australia Pvt Ltd incorporated; commences operations (2003-04)
• Commissioned for its first wind turbine in USA (2002-03)
2004- • First 1.25 MW Wind Turbine Generator is commissioned for M/s Velathal Spinning Mills Limited (2002-03)
05 • First set of type S60 blades are dispatched from Rotor Blade Unit, Daman, India (2001-02)
and • Suzlon Energy Gmbh, Germany is incorporated; commences operations (2001-02)
Before • AE Rotor Holding B.V, The Netherlands, is incorporated (2000-01)
• Suzlon Energy Ltd first 1 MW Wind Turbine Generator is commissioned by M/s Niskalp Investments, Tata
Group (2000-01)
• Suzlon Green Power Limited is incorporated; commences operations (1999-2000)
• Suzlon Energy Ltd wins Bajaj Auto Limited and Tata Finance Limited's Wind Farm projects in Maharashtra
(1999-2000)
Other Players
Company Market P/E EV/EBITDA
Cap(US$Mn)
Vestas 10,973 17.3 7.6

Nordex 629 10.7 4.9

Suzlon 1934 5 15.6

Gamesa 1825 11.1 4.6

Clipper 158 8.3 3.9

30,000 Rs In crores

26,082

25,000

20,620
20,000

15,000 13,679
Sales
EBIDTA
Net Profit
10,000 7,986

5,000 3,841
2,816
2,051
889760 1,393
864 1030 943
236 -983
0
2005-06 2006-07 2007-08 2008-09 2009-10

-5,000
4,000 3772

3,500

3,000
2399
2,500

2,000
Q1 FY 10-11
1,500 Q2 FY 10-11

1,000

500
148

0
Sales EBIDTA Net Profit
-500 -369
-546
-1,000 -912
 Problems in Suzlon
• Continuous rejection of wind turbine blades
– Shares dropped 19 % because of china issue
– Shares dropped 84 % last year because of US issue
– Spends $100M to fix cracked-blade problem

• Unable to deliver promised 95% uptime (availability rate)

• Recession – a very big hit

— Installed Capacity almost equal to 2006-07
— EBITDA almost equal to 2005-06
 Key Points & Assumptions
• Debt Problem
– Sold partial stake in Hansen

• R&D & NPD outlook

– Suzlon has doubled its R&D expenditure
– Has introduced 2 new products
– Extensive research in setting up wind mills in
forested area
 Key Points & Assumptions
• Strong Q2 FY11 revenue due to improved volumes

• Strong USD 5.4 bn order book, strong FY11 visibility Order book
has grown

• Prominent Repeat Orders(India)

– Gujarat State Petronet Ltd.
– Rajasthan State Miners & Minerals Ltd.
– Gujarat Alkalies and Chemicals Ltd.
– SBI
– Gas Authority of India
 Key Points & Assumptions
• Generation Based Incentive Scheme

• Blade servicing helpdesk

• Emphasis on filing patents

• Leveraging Repower and Hansen competencies

• Backward Integration
 Key Points & Assumptions
• BTM World Market Update
– Wind power demand will rise by 180% by 2014

• Macquire Research
– Wind energy continues to be the cheapest source
of energy(renewable)
• Wind energy production : 64.3 euro/MWH
• Solar energy production : 144.8 euro/MWH
 Assumptions
• World global sales to increase on an avg by 22%

• Market share to be around 10% till 2011 and be at 14% by

2014

• Looking at positive indications in the first half of FY11,

Sales increase in Suzlon in tandem with increase in global
sales

• EBITDA – average of past 5 years (as a percentage of sales)

 Assumptions
• Debt has been reduced in Annual Report Estimates
– 10% reduction assumed for the FY14 and FY15

• Interest Rate = 9.5%

• Depreciation increases 20%

• CapEx+Change in WC increases 5% and then will

reduce 35% each year
 Valuation - FCFE

• No of shares = 1,556,731,743

• Value = 16834830059

• EPS = 10.8142139
 Valuation – P/E
• P/E is 5.04

• Substantially lower than its competitors

• The stock is undervalued

• Median value is 10.7

• Current Market Price is 54.6

• Probable Stock Price is 83

 Valuation – EV/EBITDA
• EV/EBITDA is 15.6

• The value is higher than its competitors

• Sales are really low right now

• Shareholders continue to see value in the

stock
 Conclusion
• Positive Outlook backed by improvement in
first half of FY11

• On the path of damage control

• Interest in the stock and the company is back

Thank you!!
Presented by
Himanshu Savsani
Manisha Parpiani
Rajvi Singhi
Shekhar Singh
Srilakshmi
Yogesh Jain