Suzlon among the top gainers, up 8.5%

Wind turbine maker, Suzlon Energy is among the top three gainers. Friday, the stock was up 8.49 per cent at Rs 65.20 on BSE, and has gained a
whopping 46.68 per cent over the last week.

On Thursday, the company informed BSE that the New Zealand based TrustPower Ltd has started the stage 1 of its first Australian wind farm located at Snowtown 170 km north of Adelaide. The said wind farm comprises of 47 numbers of Suzlon S88 turbines.

However, the Suzlon stock is extremely risky to be invested in, feel market participants, as the industry scenario is bleak and the company is exposed to many issues.

Morgan Stanley, on Nov 3, downgraded the stock from overweight to underweight and cut its target price from Rs 450 to a little more than one-tenth to Rs 52.

The investment bank perceives rising risks to its business model. Its has cut is volume estimate for Suzlon by 17 per cent and 24 per cent in FY09 and FY10 respectively due to low visibility of the industry, thanks to massive downtick in oil prices, which is likely to delay the renewal of PTC in the US and pose difficulty in financing wind power projects. This is expected to result in 29 per cent and 40 per cent drop in earnings, respectively.

Growth from access to REpower technology looks unlikely in the short term as the company has decided not to try to exercise the domination and profit transfer agreement with REpower, due to opposition from lenders who will be financing the next round of growth for REpower.

Morgan Stanley also thinks that Suzlon will be funding its growth with large debt on account of cancellation of its rights issue.

Source: EconomicTimes