Fundamental Analysis of Suzlon #StockScoreCard

Introduction

Suzlon Energy  is a wind turbine supplier based in Pune, India. Formerly ranked by MAKE as the world's fifth largest wind turbine supplier, it has since dropped out of the Global top ten rankings (as of 2014) due to extensive losses and inability to repay debts.





Interesting Facts

  • Suzlon operates in over 18 countries and 6 continents!
  • Has over 17,000 MW capacity worldwide.
  • Price of the share has fallen 97%  from its peak since 2008


Fundamental Analysis

1. Growth Story

Suzlon has been struggling over the past many years to maintain consistent revenues and profits.

Recent changes in the governance policy has damaged the company's scope for making decent profits. Government of India has decided to proceed with auction regime, which has led to extreme competitiveness among companies and thus losing the pricing power!

Lately, Solar energy has proven that clean energy need not be expensive by beating existing non-renewable energy prices by huge margins! Thus Solar energy companies has also joined the aggressive competition to get orders from government auctions, thus struggle of Suzlon continues!

One might argue that renewable energy is the future when judging Suzlon.

Yes, renewable energy is a huge market looking at the future, but looking at Suzlon's current financial situation it is very highly unlikely that it will be a winner!

2. Shareholding Pattern

Promoter holds only a mere 21% of the company shares which is not so great!

3. Debts

Suzlon has very high debts, which is bad!

While company is struggling to cut losses, paying back debts is not a question at this point in time.

Debt/Equity is around 5x ! (which is very bad)


4. Return on Equity

Return on equity is extremely bad: -12.53

You can check out more info here: link 

5. Valuations

  • Current Stock Price: 12.2
  • Earnings (last 4 quarters): -0.05 + 0.13 + 0.10 + 1.15 = 1.3
  • PE Ratio: 12.2/1.3 = 9.38 (which is very good)


Summary

  • Personally, our decision has been to stay away from Suzlon!
  • Although the valuations look very cheap, looking from investment point of view this is not a great stock to be invested for long term!
  • Traders love Suzlon stock because it has a lot of liquidity and volatility.
  • In short, Suzlon is a great stock for trading, not investing!



FYI, #StockScoreCard is an special blog series where we will try to share the fundamental analysis of an individual stock based on the five multibagger magic mantras (link)

Check out all #StockScoreCards here: link


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