Porinju Veliyath Latest Stock Pick Confidence Petroleum

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Pee Vee
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Re: Porinju Veliyath Latest Stock Pick Confidence Petroleum

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parag wrote: Thu Aug 30, 2018 7:32 pm Sir,whts ur Opinion about Suzlon ,should buy or wait at this level
It is difficult to tell whether Suzlon is an investment grade stock because of the number of challenges facing it.

However, at the same time, if things work out, it can be a multibagger.

Some small allocation can be made to the stock.

According to an article in Mint, in May, Suzlon predicted 45-56% revenue growth for the current fiscal year on the basis of its order book and execution capabilities. However, it recently withdrew the growth guidance citing approval delays, prolonged execution cycles and bid deferrals. The management further said that clarity will emerge only in the third quarter of FY19 as it expects the industry to adjust to the new execution timelines and return to growth in FY20.

However, the announcement should not be a deal breaker for investors, given that the renewable energy sector has been in the midst of a transition for about a year now following the change in rules in feed-in tariffs and auction-based capacity addition.

That said, Suzlon’s decision to withdraw its growth guidance on the back of weak financials in the June quarter and the cancellation of capacity addition tenders for wind power show that the transition to the auction-based regime is going to be far from smooth. Apart from the challenges to capacity addition in the near term, there will also be ramifications for equipment suppliers such as Suzlon, Inox Wind Ltd and other unlisted firms.

However, KR Choksey Securities has a buy call on Suzlon Energy Ltd with a target price of Rs 15.8 . The current market price of Suzlon Energy Ltd. is Rs 7.53 Time period given by the brokerage is a year when Suzlon Energy Ltd. price can reach defined target. Suzlon Energy Ltd., incorporated in 1995, is a midcap company with a market cap of Rs 4043.03 crore.

Investment rationale by KR Choksey

We recently met Mr. Kirti Vagadia, Group CFO, Suzlon Energy Ltd, to get insights about present developments within the industry as well as the company. During our meet, Mr. Vagadia explained to us about the challenging times in FY18 along with promising outlook with healthy order backlog in the near future post improvement in the order announcements by SECI. The management seems confident that the Indian wind sector will witness 8-10 GW of capacity addition every year for next 4-5 years, which could translate into capacity addition of ~2-2.5 GW p.a. by Suzlon given its dominant market share. The expectation of robust capacity addition is attributable to the national wind energy target of 60 GW by FY22. Further, sharp cut in the wind tariff post change in the regime could also result into adoption of more green energy as against thermal in the years to come.

We expect the progress could also get ramped up once there is be successful adoption of a wind hybrid technology, which will improve the average PLF in the industry. In terms of the technology, management highlighted Suzlon has always remained foremost in terms of the latest technology adoption, which can be ascertained from the fact of launching of S111/140, S128/140 ahead of competition. We expect similar trend is likely to continue in the future, which could assist the company to maintain/improve its market share in the overall industry. In terms of the debt repayment, the company is considering to divest its stake in domestic O&M business this fiscal, which could help them to reduce LT debt. The company has overall debt excl. FCCB stands at INR -108.6bn as on FY18 of which LT & ST debt remained at INR 69.7bn & INR 38.9bn respectively. Going ahead, we expect net debt to EBITDA to fall to 4.8x by FY20E from 11.4x in FY18.
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