The approval of the much-debated renewable energy production tax credit (PTC) by both the US Congress has brought renewed hope for the US wind energy market.
The renewal in PTC through December 2009 is a shot in the arm for global wind energy players. With an order book concentrated in the US, Suzlon Energy is likely to benefit from the tax credit renewal in the fastest growing wind energy market in the world.
Sound low-cost manufacturing bases in India and China and access to higher end technology through acquisitions have provided the right grounds for Suzlon’s take-off as a leading wind energy company. Globally too, the stage appears set for steady ramp up in renewable energy sources, what with several nations setting targets to generate a certain percentage of their energy needs from this source.
Investors with a three-five year perspective can consider investing in the stock of Suzlon Energy. At the current price of Rs 86, Suzlon trades at 5.7 times its projected FY-10 earnings. The stock price and its price-earnings multiple are at all-time lows, providing an attractive entry point.
However, given that the stock markets themselves appear short of any support, investors can consider adding the stock on declines linked to broad markets.
A long-term perspective on the stock is a pre-requisite as the benefits of synergies arising from the Hansen and REpower acquisitions would accrue only over time. Meanwhile, the company could also be burdened with short-term challenges such as high debt and muted profit margins as a result of acquisitions.
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