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Windicator: Annual stock price analysis -- April 2016 and global feelgood factor

WORLDWIDE: The review of manufacturers' 2015 shares performance reveals that companies beat forecasts amid turbulent conditions.

This year all eyes are on the US, as it enjoys the stability of five years' support. China, which had stellar growth in 2015, is unlikely to repeat this year. Last year had already seen a shift — albeit slight — away from the powerhouse of Europe. It could not match the new installations of 2014, and prospects remain reduced. In the Americas, six US states and Argentina show best potential. Elsewhere South Africa and Morocco are promising, and in Europe Norway and the Netherlands. are promising, as are South Africa and Morocco.

Stock price analysis

Wind turbine manufacturers came through a highly volatile year in global markets to post an impressive set of annual results for 2015. A number of leading firms in the sector reported their strongest ever performance figures — in several cases exceeding their own and analysts' expectations — and appear to be in a strong position to achieve further growth over the next few years.

Stock market performance was also broadly strong in the face of severe macroeconomic headwinds - the shares of the three European giants, Vestas, Gamesa and Nordex, all saw major gains, although their Asian rivals Goldwind and Suzlon performed less well. Analysts remain bullish on the sector as a whole, with more than 80% of ratings either a "buy" or "hold".

Major growth amid varied performance

China's Goldwind has become the world's biggest wind turbine manufacturer after a year of astonishing growth. The company installed so much turbine capacity in 2015 it overtook long-time market leader Vestas, according to business advisory firm FTI Consulting. Goldwind's performance in 2015 also put it ahead of its competitors in Europe and the US: its preliminary full-year figures revealed that sales were up almost 70%, resulting in an increase in operating profits of 48.7%.

The firm's net profit of CYN 2.8 billion ($427.7 million) was 55.7% higher than in 2014, but slightly lower than some analysts had predicted. Financial advisers China Galaxy International suggested this may have been due to low production hours of the wind-farm segment due to grid curtailment in north-east China.

Goldwind's stock endured a choppy 2015: having at one point been up by almost 57%, it slumped during August's equity rout and has not recovered. For the 14-month period from January 2015 to 29 February this year, Goldwind's shares were down 29.2%. However, analysts remain more positive about Goldwind than any other pure-play wind-turbine manufacturer, with just under 87% rating the stock a "buy" or "hold".

Highest net profits exceeded forecast

Vestas raised its dividend and predicted record sales in 2016 after posting its strongest-ever set of annual results. The company's full-year revenue of €8.4 billion was up 21.9% on 2014, while operating profits were up by just over 50%. Its net profit for the year of €685 million was also its highest ever, beating the mean forecast of 17 analysts on Bloomberg for a €637 million profit. The operating margin beat the company's prediction, and free cash flow came to more than €1 billion, also exceeding the guidance.

On the back of the results, Vestas' board recommended a dividend of DKK 6.82 (€0.9) per share, up from DKK 3.9 last year. The company predicted sales of at least EUR9 billion this year and said it expected an operating profit margin of at least 11%. During 2015 Vestas' stock virtually doubled in value before falling back slightly in the first few months of this year. In early March, just under 80% of analysts tracked by Reuters were posting a "buy" or "hold" recommendation for the stock.

India contributed to 29% of world sales

Gamesa reported net profits of€170 million, up 85% from last year, exceeding the company's own forecast. Its revenues totalled €3.5 billion, 23% higher than in 2014, on the back of expanding sales in both its wind-turbine and operation-and-maintenance businesses, while operating profits were up 54.1%. The largest contributor to growth was the Indian market, which accounted for 29% of world sales, followed by Latin America, which contributed 27%.

The company responded to the results by moving its 2017 goals a year forward to 2016. Plans to build in excess of 3.8GW of capacity were also moved forward a year, and the company expects its 2016 EBIT margin to widen to about 9%.

Gamesa's shares, having fallen in the first few weeks of 2016, surged after the publication of the results. By the end of February, the stock price was up more than 120% over 14 months. At that time, analysts remained overwhelmingly positive about the company, with more than 81% recommending either a "buy" or "hold". French financial group Societe Generale raised its estimate for 2016-17 earnings per share by 16-17% and said the stock remained "fundamentally attractive".

Operating profits jumped by 60%

German manufacturer Nordex increased sales last year by 40% to €2.43 billion, its preliminary results showed. This exceeded its own forecast of €2.3-2.4 billion, and also the €2.37 billion average analyst forecast reported by Reuters. Operating profits jumped by more than 60% to €126.2 million, which, despite unplanned additional costs on a number of externally sourced rotor blades from a supplier, were in line with management expectations, Nordex said.

The company did not publish a net profit figure in its preliminary results. Its audited full-year results were due to be published after Windpower Monthly went to press.

Nordex performed well in its core market of Europe and Africa, boosting sales there to €2.14 billion from €1.51 billion in the previous year. It also generated a further €286.1 million of sales in the Americas, up from €200.7 million in 2014. In a statement Nordex said that healthy order books have provided it with "very solid foundations" for further growth in 2016 and beyond.

Nordex's shares had gained 71.3% in the 14 months from the beginning of last year to the end of Februrary, and have now risen sevenfold over the past three years. As with Vestas and Gamesa, more than 80% of analysts retain a favourable view of Nordex's stock.

Improvements following Senvion sale

India's Suzlon did not publish annual results in February as its fiscal year runs from April to March, but adding its Q4 figures to those of the previous nine months reveals that 2015 revenues were down by almost 50% on 2014. EBIT was well down too - from an operating profit of INR 475.6 million (€6.4 million) in 2014 to an operating loss of INR 167.7 million in 2015.

However, a closer look at the figures shows that the 2015 negative EBIT was due entirely to the INR 3.3 billion loss (€44m) in the first quarter, when performance was hit hard by an "impairment of goodwill" arising from the sale of the company's German subsidiary Senvion, formerly Repower. Over the remaining nine months of 2015, Suzlon posted an operating profit of INR 3.1 billion (€42m), which compared to a loss of INR 1.1 billion in the same period in 2014.

There was better news at the bottom of the income statement, where Suzlon posted a full calendar year 2015 net loss of just INR 4.6 billion — well down on the INR 85.5 billion net loss posted the previous year. However, the announcement of its Q4 net loss of INR 1.1 billion surprised the markets (Suzlon posted a INR 10.4 billion net profit in Q2) and led to a sharp decline in the stock price, which was down almost 40% for the year at the end of February.

For the 14-month period beginning in January 2015, the share price was down 9.0%, having at one point been up by more than 100%.

Suzlon's management has restated its confidence that it will be in profit for the fiscal year 2016, ending on 30 March. Of the four analysts tracked by Reuters, three rate the stock as a "buy" and one as a "sell".


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