Gamesa Corp Tecnologica Sa GAM SM
RENEABLE ENERGY | EUROPE
Catharina Saponar, CFA +44 20 7102 1231 catharina.saponar@nomura.com
Spanish macro vs global growth
ï‚ Exposure to the largest developers
Gamesa’s business model of multi-year framework agreements gives
it visibility on growth through FY11-12F. Other than Iberdrola
Renovables as one of the largest global developers with heavy US
exposure, this includes major utilities, but also Asian developers such
as Long Yuan and Datang who are large customers for Gamesa.
ï‚‚ Increasing exposure to new markets and clients
The company’s new strategy of increasing its manufacturing base in
China and India should position it well to deliver increasing order
momentum in the region. Beyond that, the new focus on small- and
medium-sized customers should also result in market share gains and
increase volume breadth.
 US weakness
Gamesa, like other wind turbine manufacturers exposed to US market
weakness, saw only 50% capacity utilisation in 1Q10. We see some
risk of the weak PPA situation spilling over into Iberdrola
Renovables’s project development and potentially pushing out
volumes. That said, we still expect a recovery in late-2010F to sustain
the company’s delivery trajectory.
ï‚„ Spanish overhang
Gamesa shares have been hit hard by the Spanish macro overhang
and beyond that the lack of clarity over Spanish renewables regulation
and tariffs. However, we expect the latter to clear soon.
ï‚… Valuation reflects pessimism
Gamesa shares are closing back in on trough levels, trading on a P/E
of 12.4x FY11F, versus a four-year average of 12.7x, a FY09 trough
of 6.5x and a FY08 peak of 14x. Our DCF-based
price target is
€13.00.
Key financials & valuations
(€mn) FY08 FY09 FY10F FY11F
Revenue 3,646 3,229 2,920 3,668
Reported net profit 324 115 89 160
Normalised net profit 324 115 89 160
Normalised EPS (€) 1.32 0.47 0.37 0.66
Norm. EPS growth (%) 0.5 (0.6) (0.2) 0.8
Norm. P/E (x) 6.1 17.2 22.3 12.4
EV/EBITDA (x) 3.9 5.7 8.2 5.8
Price/book (x) 1.3 1.3 1.2 1.1
Dividend yield (%) 0.0 0.0 0.0 0.0
ROE (%) 0.1 0.1 0.1 0.1
Net debt/equity (%) 0.0 0.2 0.2 0.2
Earnings revisions
Previous norm. net profit 89 160
Change from previous (%) - -
Previous norm. EPS (?) 0.37 0.66
Source: Company, Nomura estimates
Share price relative to MSCI Spain
1m 3m 6m
1.1 (16.6) (29.0)
(1.0) (24.6) (39.1)
(3.9) (6.2) (9.1)
3-mth avg daily turnover 23.97
Easy
Iberdrola 14.1
Casa Grande carta
Source: Company, Nomura estimates
Major shareholders (%)
5.0
Absolute (€)
Absolute (US$)
Relative to Index
52-week range (€)
Market cap (US$mn) 2,421
16.45/7.14
Stock borrowability
6
8
10
12
14
16
18
Jun09
Jul09
Aug09
Sep09
Oct09
Nov09
Dec09
Jan10
Feb10
Mar10
Apr10
May10
50
60
70
80
90
100
110
Price
Rel MSCI Spain
(€)
Closing price on 23 Jun €8.13
Price target €13
Upside/downside 59.9%
Difference from consensus 2.7%
FY10F net profit (€mn) 89
Difference from consensus -16.9%
Source: Nomura
Nomura vs consensus
We see Spanish macro concerns as
a share overhang. Meanwhile, the
company stands to benefit from a
strong position in recovering wind
markets, in our view.
Maintained
BUY
NOMU R A I N TERNATI O NA L P LC
 Action
We expect Gamesa to be a beneficiary of a global pick-up in wind demand in
2010F and 2011F. The company also appears to be well equipped for growth in
Asia through its recent plant expansion. Our DCF-based price target is €13.00. We
maintain our BUY call.
ï¾ Catalysts
As the company executes on its strategy to diversify its geographical spread and
client base, it should deliver order flow as a share price driver.
Anchor themes
Growth in the wind sector is a key theme within the global climate change and new
energy theme. We believe that poly manufacturers are direct beneficiaries.
Gamesa Corp Tecnologica Sa Catharina Saponar, CFA
Nomura 285
""""Risks. Gamesa may suffer a worse-than-expected price decline or order cancellations.
The supply chain may not be able to meet projected growth and the company may be
unable to launch new turbines in line with expectations. It may experience problems
with its capacity expansion."""""
