22 mar. 2009

Gamesa

We reiterate our Underweight rating on Gamesa but have reduced our target price to €9.70/share from €15.50/share. We have cut our 2009E-12E EBITDA and net profit estimates by an average of 7% and 21%, respectively, and have included a significant increase in working capital in 2009, which increases net debt.

Visible deterioration in fundamentals; Gamesa may have to cut guidance further. Gamesa has already adjusted its 2009 guidance and now expects lower volumes YoY, stable-to-higher margins and a sharp increase in working capital. Our estimates
are still below guidance; we expect a 26% decline in 2009E EBITDA. Worse sales mix by customer, reduced defensive profile. Gamesa said strategic accounts should represent 60%-70% of 2009 sales vs 100% in 2008, with spot sales making up the difference.

The higher working capital requirements are likely to drain cash and lead to an increase in net debt. Working capital could increase to 43% of sales, due to worse payment conditions for spot sales and the need to finance the development of Gamesa’s own wind farms in the US. We estimate 2009 net debt/EBITDA rising to 2.2x.