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Gamesa Is Most Expensive Wind-Turbine Maker on Buyout Bets

Gamesa Most Expensive Wind-Turbine Maker Buyout Bets
Gamesa Corp. Tecnologica SA is the most expensive wind-turbine maker based on price-earnings ratios after takeover speculation boosted its shares 22 percent since October, creating a risk for investors should no offer appear. Photographer: Eddie Seal/Bloomberg

Feb. 24 (Bloomberg) -- Gamesa Corp. Tecnologica SA is the most expensive wind-turbine maker based on price-earnings ratios after takeover speculation boosted its shares 23 percent since October, creating a risk for investors should no offer appear.

“The share price has been supported by speculation about either a bid for Gamesa from a Chinese competitor or a huge conglomerate,” said Julien Desmaretz, an analyst at Bryan, Garnier & Co. in Paris. He recommends selling the stock because it has “a weak product portfolio” and will underperform competitors. He says a takeover is not certain.

The Spanish company, which reported earnings today, trades at 28 times estimated annual profit. Investors are paying 17 times estimated earnings for Vestas Wind Systems A/S of Denmark, the world’s largest wind-turbine maker, and multiples of 26 for Sinovel Wind Group and 12 for Xinjiang Goldwind Science & Technology Co., both based in China.

Gamesa surged after UBS AG analyst Daniel Stillit identified it as a potential target for Shanghai Electric Group Co. in an October research note. Wind-turbine makers are braced for consolidation after installations slipped last year just as companies ramped up investment in new factories.

“It’s no secret to anybody in the industry that the industry at some point will go through some kind of consolidation,” Gamesa Chairman Jorge Calvet said on a conference call with investors today. “Gamesa will look at this in a very professional manner. We do not get easily excited about news that comes out in the market.”

Global turbine demand slid for the first time in six years in 2010, falling 5 percent to 35.9 gigawatts, as banks curbed loans to developers, Bloomberg New Energy Finance said. Turbine manufacturing capacity exceeded demand by 37 percent and next year will overshoot by 58 percent, even as installations gain, the London-based researcher said.

Consolidation Period

“We are heading into a period of consolidation in the turbine-supply industry,” said Eduardo Tabbush, a wind analyst at London-based New Energy Finance. “We are tracking more than 60 turbine suppliers. A lot of them will fade and a lot them will be acquired.”

The company’s stock rose for the first time in four days, closing 0.4 percent higher at 5.69 euros a share in Madrid.

Zamudio-based Gamesa report 2010 net income of 50.2 million euros ($69.3 million), the median of eight analyst estimates on Bloomberg. That’s the least profit compared with market capitalization among its six closest publicly traded rivals, according to Bloomberg data.

Gamesa was ranked the No. 6 turbine maker with a market share of 6.7 percent in 2009 in a study by Ringkoebing, Denmark-based BTM Consult.

Sales Forecast

Gamesa aims to boost sales to 4 gigawatts a year by 2013 from about 2.4 gigawatts last year by selling a new range of turbines to the U.S., China and Brazil, Chief Executive Officer Jorge Calvet told investors in October. The generators will cost 900 million euros to develop over four years and will depress its operating margin to about 4.5 percent next year.

Iberdrola SA, the company’s biggest shareholder, has increased its stake to about 20 percent from 15 percent since the plan was announced. The move should be interpreted as a vote of confidence in Gamesa’s strategy, according to a Madrid-based spokesman for Iberdrola who asked not to be identified in line with company policy.

Analysts are divided over the outlook for Gamesa, which hasn’t sold a turbine in Spain for about two years.

Rupesh Madlani from Barclays Capital in London rates the company among his top picks judging that its inroads to faster-growing developing markets such as China and Brazil and cost controls will allow the stock to outperform. Desmaretz said he’s negative on the company because its turbines are not good enough to compete with Vestas.

“Gamesa is turning to be a low-cost manufacturer, turning to Asia,” he said. “It’s increasing its sales in China and India due to a lower quality and lower price.”

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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