The world's fifth largest wind turbine manufacturer is in a bit of a spot. The Rs 7,985 crore Suzlon Energy will have to incur a cost of Rs 100 crore for retrofitting blades. Essentially, about 1251 blades will need to be structurally reinforced and the firm may need to spend additionally on higher warranty provisions and increased raw material costs. Moreover, there could be a slippage in volumes, later on, due to delays in execution. All this, say analysts, could shave off anywhere between 14-17 per cent from the company's earnings between FY08-10.

The world's fifth largest wind turbine manufacturer is in a bit of a spot. The Rs 7,985 crore Suzlon Energy will have to incur a cost of Rs 100 crore for retrofitting blades. Essentially, about 1251 blades will need to be structurally reinforced and the firm may need to spend additionally on higher warranty provisions and increased raw material costs.

Moreover, there could be a slippage in volumes, later on, due to delays in execution. All this, say analysts, could shave off anywhere between 14-17 per cent from the company's earnings between FY08-10.

The stock has already seen a slight de-rating because of the challenges the company faces on the product delivery front and analysts have turned a tad cautious. A continued recall could impact the company's bargaining power in the market and repeat orders too.

Over the last eight weeks or so, the stock has corrected 40 per cent vis a vis a 20 per cent fall for the BSE Sensex. In Tuesday's trade, Suzlon lost 3 per cent closing at Rs 243.

Meanwhile, Suzlon's subsidiaries are doing well with Hansen stepping up volumes at the expanded Belgium plant and REpower on its way to concluding negotiations for 2.9 GW of power in Europe and Canada.

The firm's order book remains robust and Suzlon's global delivery model combined with a large addressable market should help it grows revenues at about 40 per cent and sustain operating margins at 13-14 per cent over the next couple of years. Net profits should grow at around 45 per cent.

The company has share of 6 per cent in the global market and is good growth story as it attempts to become the third largest player in the world.

However, any delays in expanding capacity and therefore ramping up production could hurt profitability. At the current price of Rs 243, the stock trades at just under 23 times FY09 earnings and should perform in line with the market.

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