Blizzard hit
Suzlon Energy's stock slumped 12.9% on Tuesday to Rs 58.25, as compared with a 3% fall in the BSE Sensex.
The company had announced disappointing September quarter results on Saturday.
It also cut its volume guidance for FY2010 by 25% to 1900-2100 mega watt (mw) and said it expects breakeven at profit before tax level for FY10, at around 2000 mw. This precludes the possibility of profits this fiscal as breakeven is a no-profit, no-loss situation.
The compamy's consolidated net loss increased to Rs 355.51 crore as against Rs 22.84 crore in the year-ago quarter, impacted by a 30.7% year-on-year decline in total operating revenues to Rs 4,835.23 crore. Poor operating performance and higher interest and depreciation cost further worsened net profit performance.
Revenues from the wind business, which accounted for 39% of consolidated revenues, declined 55% due to a sharp 61% drop in sales volumes to 283 mw. Lower volumes resulted in under-absorption of fixed costs, leading to an ebitda loss of Rs 149 crore in the wind business.
Slower rate of decline in total expenditure (down 25.2%) resulted in very weak operating performance with operating margins declining 719 basis points (100 basis points make one percentage point) to 2.51%. Employee cost increased 7%, hurting operating performance.
A 35% increase in interest expenses to Rs 292.6 crore and a 48% increase in depreciation costs to Rs 188.04 crore affected profitability at the net level.
Going forward, Suzlon intends to optimise its debt profile by refinancing and pursue its planned strategic divestment of Hansen Transmission to decrease its total debt. At September end, its consolidated net debt stood at Rs 13,762 crore.
A stake sale would help the company de-leverage its balance sheet. However, analysts say Hansen sale could take longer than expected given the Belgium-headquartered company's losses in the first half of the year and low capacity utilisation. The company also needs to secure more orders going forward.
Near-term outlook for the stock appears bleak. Investors should wait for outlook to improve before considering it.

Revenue drag
DLF, India's largest real estate developer, posted weak numbers for the quarter ended September, in line with analysts' expectations.
Consolidated net profit declined 77.2% year on year to Rs 439.74 crore as revenues dropped 53.2% to Rs 1,750.94 crore and interest expenses increased more than five fold to Rs 248.61 crore.
Revenues include sale of around 2 million square feet (msf) on account of bookings from Delhi Capital Greens and Bangalore projects. On a sequential basis, revenues increased 6%. Even as average price realisation increased 36% over the June quarter, poor demand in the commercial segment led to a marginal decline (about 1.5%) in overall average price realisation. The commercial and retail segment still appears weak, though analysts expect it to revive in 6-9 months.
Poor revenue growth and higher staff cost and other expenditure impacted operating performance, with operating profit margins declining 702 basis points to 52.18%. However, operating margins increased nearly 700% on a sequential basis due to higher contribution from the luxury or premium segment housing.
Around Rs 850 crore of DLF's debt is expected to mature in FY2010. A cash balance of about Rs 1,110 crore puts the company in a comfortable situation to meet its debt obligations.
Going forward, DLF intends to reduce its net debt to Rs 6,000-7,000 crore from more than Rs 14,000 crore as on March 2009 through operating cash flows from current and new launches, balance payments from debtors and asset sales. The company plans to launch about 10-12 msf of properties across key locations in the second half of the year, backed by robust demand in the housing segment.
Most analysts are negative on the stock.
"We rate the stock Sell with a RNAV-based, 12-month price target of Rs 375. Upside risks include a sustained pick-up in property transaction volumes," Vishnu Gopal and Aditya Soman of Goldman Sachs wrote in a note to clients post results on October 30. RNAV stands for revalued net asset value.
Pallavi Pengonda (p_pallavi@dnaindia.net)



Tag: ,