Suzlon Energy
Buy: Pandora’s Box Opens Wider
Buy/Low Risk 1L
Price (03 Mar 08) Rs260.20 Target price Rs396.00
Expected share price return 52.2%
Valuation
Approach 1: One can value Suzlon as using a P/E multiple for the entire entity Suzlon WTG + REPower WTG + Hansen Gearbox. In this approach we use a P/E multiple of 26x December 2009 and we get a fair value of Rs387.
Approach 2: We can value Suzlon + REPower using a P/E of 26x December 2009 multiple for Suzlon WTG +REPower WTG and add value of Hansen at a 25% discount to market capitalization. We get a fair value of Rs406 in this approach.
We take an average of the above two and set a target price of Rs396 for Suzlon.
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