>SUZLON ENERGY LIMITED (NOMURA)

■ Disappointing 1H FY10 results; reduced FY10 guidance
Suzlon’s consolidated 1H FY10 revenue was INR89bn, down 11% y-y and representing merely 32% of our FY10F estimate. Suzlon Wind only delivered 406MW of wind turbines in 1H FY10, accounting for merely 17% of the lower-end of Suzlon’s original guidance. Suzlon consequently lowered FY10 shipment guidance to 1,900-2,100MW from 2,400-2,600MW.

■ Positive outlook in key markets but limited S-T impact
Over the past few months, some positive policy developments have taken place in Suzlon’s key markets: US, India, China and Australia. While we do not expect these to translate into real business momentum in the near term, we are more positive about our current assumption of a 32% y-y shipment growth (2,500MW) in FY11F.

Near term remains windy

■ Debt restructuring underway; cash remains tight
Suzlon’s net debt to equity ratio reached 160% by September 2009. Suzlon continues to work towards de-leveraging the balance sheet and reducing absolute debt levels through the planned sale of Hansen, refinancing its current debt and fund infusion from promoters. Based on our downward earnings revision, we believe Suzlon runs a risk of not meeting its debt covenants, but management noted that the penalty may only result in slight increase in interest rates.

■ Await positive catalysts; maintain NEUTRAL
Our revised price target of INR64.0 is based on DCF valuation, representing potential downside of 4%; we maintain NEUTRAL. Over the short term, we expect share price weakness due to poor 1H FY10 results, reduced guidance and risks on order intake. However, we are positive about Suzlon’s long-term potential given our bullish view on the wind power industry.

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