>SUZLON ENERGY (KOTAK SECURITIES)

■ Order inflow revival to drive value. The management appears confident about avoiding one-off charges but guarded on the subject of realization and margins. We upgrade to BUY rating based on (1) signs of order inflow revival, (2) sector prospects and (3) significant upside to our target price of Rs140/share post the correction. The stock will also be driven by (1) lower working capital, (2) pick up in order inflows and (3) potential balance sheet restructuring after the Hansen stake sale and equity issuance.

■ Management confident about on one-off charges; guarded on realization and margins We met the management of Suzlon recently and found the management confident of not having undue one-off charges related to availability and liquidated damages going forward. The message on likely realization, margins and full year interest cost is more guarded though. The management highlighted that both equity issuance as well as Hansen stake sale are possibilities on the table and may be exercised to reduce debt levels as well as have flexibility in cash flows for pursuing objectives such as buying the balance stake in Repower.

■ Upgrade to BUY based on likely order inflow revival; sector prospects
We upgrade our rating on the stock to BUY from ADD earlier based on (1) signs of order inflow revival and (2) likely margin improvement led by elimination of one-off items such as availability based and liquidated damages, (3) significant tail winds in the sector as governments across the globe pushed the renewable energy agenda and (4) significant upside to our target price of Rs140/share post the correction seen in the last two weeks. We highlight that incrementally the stock would be driven by (1) working capital reduction, (2) pick up in order inflows and (3) potential for balance sheet restructuring based on Hansen stake sale and equity issuance.

■ Change estimates based on lower volumes and margins; retain target price on FY2011E valuation
We have changed our earnings estimates to Rs6 and Rs9.4 for FY2010E and FY2011E, respectively, from Rs7.6 and Rs10.5 earlier. We retain our EV/EBITDA multiple and SOTP-based target price of Rs140/share based on FY2011E valuation Key risks include (1) near-term slowdown in demand, (2) uphill climb to regain customer confidence post the recent blade cracking problem, (3) weak outlook for Indian wind power markets and (4) possible recurrence of one-off charges as
witnessed in 4QFY09. Key upside risks arise from (1) stronger-than-expected order inflows and execution, (2) sharp recovery in global demand environment, (3) strong platform in terms of breadth and depth of manufacturing, marketing and R&D capabilities.

To see full report: SUZLON ENERGY

>SUN PHARMACEUTICAL INDUSTRIES (KOTAK SECURITIES)

• Deal with FRX positive for sentiment
• Lexapro is an important product for Forest Labs
• SUNP reaches settlement with FRX
• Difficult to quantify size and timing of upside

To see full report: SUN PHARMACEUTICALS

>SINTEX INDUSTRIES (MOTILAL OSWAL)

■ 1QFY10 sales down 9% YoY; adjusted PAT down 28% YoY: Sintex 1QFY10 results are significantly below expectation. Sales are down 9% YoY at Rs6.6b (expected Rs7.9b). EBITDA margin is up 50bp YoY at 13.2% (expected 15%). Reported consolidated PAT is up 6% YoY at Rs606m. However, this includes ~Rs200m of unrealized forex gain on account of FCCB translation. Adjusted for this, PAT is down 28% YoY at Rs406m (expected Rs681m). The main reason for the weak quarter is low government business pending elections.

■ Monolithic and pre-fabs to remain growth drivers: Sintex’s monolithic construction business has an order backlog of Rs18b to be executed in the next two years. This offers revenue visibility through FY11 at least. The various government schemes announced in Union Budget 2009-10 are expected to sustain demand for Sintex’s pre-fabricated structures business in the form of rural classrooms, health clinics, toilets, worker shelters, etc.

■ 10-15% downgrade in estimates: Based on 1QFY10 results and subsequent concall, we have downgraded our FY10 and FY11 sales estimate by 3-4%. EBITDA margins are also down 70-110bp. As a result, our FY10 EPS is downgraded by 15% to Rs23.2 and FY11 EPS by 10% to Rs31.1.

■ Stock trading at 8x FY10E, target price of Rs232 (10x FY10E), Buy: Even after our earnings downgrade, FY09-11E EPS CAGR is a reasonable 14%. RoE is 17-18% and the company is near zero-debt (Rs15b cash against Rs16.5b total debt including working capital). At CMP, the stock is trading at a P/E of 8x FY10E and 6x FY11E. We continue to value Sintex at 10x FY10E EPS to arrive at a revised target price of Rs232 (Rs273 earlier), 19% upside from current levels. We maintain Buy.

To see full report: SINTEX INDUSTRIES

>ZEE ENTERTAINMENT ENTERPRISES (CENTRUM)

Inline results despite lower ad revenues

■ Ad revenues plunge 29%: Q1 advertisement revenues fell 29% YoY (13% QoQ) to Rs1,979mn on the back of economic slowdown, shift in advertisers to sports channels during the IPL 2 season and T20 World Cup and increased competition in the GEC space. However, we see an uptick from H2FY10 and believe the worst is over.

■ Subscription revenues still robust: Subscription revenues grew 12% YoY to Rs2,409mn, mainly on account of hefty 88% increase in DTH revenues to Rs467mn. International and domestic non-DTH revenues, which contribute more than 40% to topline, remained flat QoQ.

■ Cost-cutting measures help sustain margins: The 36% QoQ decline in SG&A and other expenses, along with 11% QoQ decline in employee costs, helped the company maintain margin at 24.6% vs 26.6% in Q1FY09. The significant reduction in interest cost helped prop up adj PAT (after minority interest) to Rs1,018mn

■ Upgraded to Buy: We have upgraded ZEEL to Buy, as we expect ad revenues to increase, going forward. Positives also stem from the company’s strong operating performance, sustainable subscription revenues (due to increasing DTH revenues) and improved ratings of flagship channel, Zee TV. We maintain our target price of Rs209, valuing the company at 18.5x FY11E.

To see full report: ZEE ENTERTAINMENT