UBS maintains 'Sell' on Suzlon Energy

MUMBAI: UBS has maintained ‘Sell’ recommendation on Suzlon Energy with a price target of Rs 50 per shares after the company came out with its quarterly results.

“The 1Q FY11 results are not comparable with 1Q FY10. In the previous year, Hansen was consolidated, whereas this year it has been treated as an associate because of a stake sale in November 2009. In 1Q FY11, Suzlon has reported a decline in consolidated net sales of Rs 24.04 billion of 42% YoY and negative EBITDA of Rs 5.46 billion.

On a reported basis, the net loss is Rs 9.12 billion and adjusted for forex loss of Rs 373 million, the recurring net loss is Rs 8.75 billion. The results are disappointing and below UBS estimates.

Our DCF-based price target of Rs 50 is based on: 1) intermediate growth of 10%; 2) long-term growth rate of 5%; and 3) WACC of 12.4%. We have a Sell rating on the stock on the low visibility of revenues and no near-term catalysts,” the report said.