Here is 10 years Fixed asset turnover ratio of this company. As we can see that they have peak of 0.4 times of FAT during high infra spending in economy i.e Fy 07-09, i think we also have to consider pricing power of the company as in Fy09 their capacity utilization was about 87-90% but there was demand from all sectors, while currently they have major demand from wind turbines only so i think they have little less pricing power than those years. That we can even see from their EBITDA margins which was more than 73% , currently which is around 63%.
By Fy2017, their Gross fixed assets will be Rs.2700crs and by Fy18, their fixed assets will be Rs.3000crs with debt of around Rs.600crs. Now if we assume asset turnover of 0.27 it can have turn over of Rs.729 crs and EBITDA of Rs.459 crs with EBITDA of 63% margins. so if infra spend boost up going forward, i think it will have lots of room to improve its margins, if you consider 0.35 of FAT and 70-72% of EBITDA margins.
The actual figures for wind turbine installations for the Fy2017 is 5400 mwā¦this is 35% more than the estimate of 4000 mw given by HDFC. Can we expect a huge jump in Q4 figures of Sanghvi movers?
The problem with relying on such statistical analysis is that we miss out on stories where the present is vastly different from the past. In Fy 2017, the wind power installation reached 5400 mw and for fy 2018 it is expected to go upto 6000mwā¦obviously such a positively developing story would be missed out.
I hope that the management comes up with a con-call and a good explanation on the results. Weak execution by wind energy companies and possibly some GST related disruption in June may have a large part to play in this I feelā¦ Hoping for some positive commentary by managementā¦
I agree. I think investors should consider exiting Suzlon also. I had a very large holding. I have exited Suzlon. Sustainable growing bottom line from Wind related projects appears doubtful.
@nabilmoideen my initial buy on Sanghvi was based on cheap valuations with play on infrastructure and indirect investment on renewable energy(wind energy, esp. as suzlon was on uptick), good management and their plan to increase capex which gave good visibility for at least 2 yrs. Now since Wind energy is not showing continued investment and the management is cancelling its crane orders, I sold Sanghvi movers. One lesson I learnt was that for infrastructure spending the pvt players can only do very little for turn around to happen. The major impetus and money has to come from Govt agencies upfront which is clearly lacking at least in wind energy(even though their plan is sky high)
The company may turn around and show good profit once govt starts renewable auctions. Company is currently available at 6x FY17 earnings which is very easy to clock once new order for wind starts coming in.
A cousin dealing in cranes business told me that company is fundamentally sound, but in short term say for another 6-9 months it will report poor results as it mainly deals in wind energy and no new projects coming up in that sector
