You have done a comprehensive analysis and presented various scenarios. But I think it would have been better had you included one more element in your analysis.
There are three things which eat up a companies earnings…depreciation, debt / interest payment and finally taxes. You have omitted the impact of taxation.
As clarified by J.P Chalsani in earlier concall…Suzlon wont by paying any taxes for the next 4-5 years. This is on account of its accumulated losses earlier. Hence, this aspect contributes to a good jump in eps of suzlon going forward. As debt is reduced and no tax is deducted from earnings…Suzlon may see a good jump in eps in FY 2019.
Since market is an advance discounting mechanism…I think the stock price will first go up significantly in the next 12-18 months and thereafter, there will be longish consolidation period where the price waits for the earnings to rise and catch up…
While the market participants and brokerages envisage a rise in stock price which is back ended, I am more inclined towards the view that the rise in price will precede the rise in eps…I am more bullish on suzlon in the next 12 months…and after that expect a 3-4 quarters of sideways movement…just like what we have seen in some other stocks such as spice jet, Chennai petroleum,escorts, kec international, titagarh wagons, beml…and a host of other stocks.
By getting caught in the minute details abd micro analysis, Investors are missing the bigger picture. Renewable energy, without any incentives (such as GBI or AD) has emerged more competitive and efficient than thermal power…in India as well as globally. And this is just the beginning…better designed and more efficient products are in the pipeline. This will tilt the balance more and more in favour of renewables vis a vis thermal energy. Furthermore, in renewables there are no uncertainities in the form of cost escalation, land acquisition, environmental clearance, coal linkage etc.
It is almost as if we are witnessing a revolution in energy sector…and Suzlon is a good enough company to get exposure to this second green revolution which is noe underway.