SoEvery profitable quarter for Suzlon adds to our comfort in the outlook and the turnaround story at play. While we are comforted by a profitable quarter, we also observe certain issues which indicate the outlook and turnaround story is not as rosy as Suzlon would want us to believe.
Observation 1: Not winning market share
We do not believe in Suzlon managements claim that it is on a path to moving towards a market share of around 50%. Comparing the order backlog of Suzlon with its listed competitor Inox Wind makes it very clear that Suzlon is very far from a getting a market share of around 50%
Order Backlog (MW) Suzlon Vs Inox Wind
|Quarter Ending||Suzlon||Inox Wind|
Observation 2: Order book looks flat
The order book is flat and not showing any signs of growing.
|Order Book as of Quarter Ending||Order Book (MW)|
Observation 3: Order book yielding a lower realization per MW
We see the order book yielding the lowest realization of Rs 6.11 Cr per MW in the last 8 quarters. Incidentally, Suzlon had highlighted the realization of Rs 6.43 Cr per MW for the quarter ended 31-Mar-16. We did not notice a mention of the same metric after 31-Mar-16.
The secular trend of realizations trending lower does not bode well for the margin profile of Suzlon.
|Quarter Ending||Order Backlog(MW)||Order Backlog(Cr)||Realization(Cr/MW)|
If you have a position in Suzlon then one needs to sit tight and be patient. If you are done being patient, then use the volatility in price to be on the lookout for a profitable/ break even exit.
If you are looking to buy Suzlon, then you need to use volatility in prices to enter into the stock. We have a psychological benchmark of Rs 18 per share, the price at which DSA entered Suzlon. If one gets entry at a point significantly below the psychological benchmark then one could consider an entry.
Categories: Stock Views