>SUZLON ENERGY (UBS)

■ India sets emission cut targets: India has set its bargaining position for Copenhagen as a voluntary emission cut target of 20-25% by 2020 from 2005 levels and has said that they will not accept any legally binding cuts to emissions. The target is lower than what China, and Brazil are targeting but is in line with India’s own reduction of emissions by 17.6% from 1990-2005. Given all the backroom work carried out, we think the Copenhagen summit will take the whole process of emission cuts forward rather than setting the clock back. But, it is unlikely to set very aggressive targets.

Run up to Copenhagen

■ If a consensus emerges, we think the development would be positive: In our view, the key to step forward is to arrive at a consensus among developing and developed countries on emission cut targets. An acceptable agreement could boost the focus on renewable and in our view, wind turbine industry would see long-term tangible benefits. In addition to wind, we see opportunities in smart grids (ABB, IT services companies), super-critical equipment (L&T, BHEL)/coal gasifiers (L&T), energy efficient buildings (ABB) and transport related.

■ For Suzlon, wind turbine market recovery is critical: We think the market will be more focussed on the expected revival in industry wide orders in 1HCY10. We estimate that the sector should re-activate from H1/10 on improved economics, as (1) turbine prices should be c20% lower in 2010 vs 2008; (2) project financing returns.

■ Valuation: Maintain Neutral: Our DCF-based price target of Rs100 is based on: 1) intermediate growth of 10%, 2) long-term growth rate of 5%, 3) WACC of 11.8%.

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