IDFC Securities - Inox Wind (INOXWIND) Inox Winds Q1FY19 results (Outperformer) - Start of execution; Turning corner

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IDFC Securities

Shirish Rane

Inox Wind's Q1FY19 results (Outperformer) - Start of execution; Turning corner

Q1FY19 result highlights

INOX executed 80MW of order in Q1FY19. Note that the order book at end of FY17 had been cancelled owing to on going transition from Feed in Tariff (FiT) to auction regime. As a result, INOX witnessed execution of mere 8MW in entire FY18..
INOX has started execution in SECI 1 and 2 order book from this quarter. SECI 1 – 300MW order is likely to be executed by Q3FY19 while SECI 2- 300MW is likely to be executed by Q4FY19.
As a result, INOX sales was Rs4 bn(+306% yoy), EBITDA came in at Rs704m and INOX reported profit of Rs104m (vs est of loss of Rs21m), after four consecutive quarterly loss.
INOX reduced its receivables from Rs24bn (end Mar 2017) to Rs11bn (end Mar 2018) and further collected Rs3bn of old receivables (end June 2018). All old receivables are likely to be collected by Q3FY19
INOX has a strong order book of 950MW. The order book constitutes 250MW each under SECI tranches 1 and 2, 200MW under tranche 3, 100MW under tranche 4 and a 50MW order from states won on its balance sheet (SECI 1 and 2 downsold to leading IPPs). INOX has also received orders from third parties for 100MW of projects won under SECI tranche 1 and 2.

Key positives: Strong order inflow of 950MW in FY18; First quarterly profit after four consecutive quarter of loss

Impact on financials: We maintain our earnings estimates for FY19E/FY20E (EBITDA margin of 13% in FY19 & FY20)

Valuations & view

INOX Wind (INOX) is set for a turnaround after a disappointing FY18 (wind power installations fell 40% yoy to 1.8GW) as seen from the 1QFY19 results. We believe the transition from Feed in Tariff (FiT) to auction regime will help turn the tide in the wind power industry in FY19E. We believe FY19E will be promising for INOX, boosted by the company’s order book of 950MW and auction pipeline of 10GW (expected for the industry) each in FY19E and FY20E. INOX is suitably placed to reap the benefits from the new regime, resulting in PAT of Rs2.1bn in FY19E and Rs2.5bn in FY20E. We reiterate our Outperformer rating on the stock with a target price of Rs136/share (12x FY20E P/E).

09/08/2018 8 EN

Underlying

Inox Wind

Inox Wind Ltd. Inox Wind Limited is an integrated wind energy solutions provider. The Company is engaged in the manufacture of Wind Turbine Generators (WTGs). The Company provides Engineering, Procurement and Commissioning (EPC); Operations and Maintenance (O and M), and Common Infrastructure Facilities services for WTGs. The Company offers various products, which include Inox DF 93.3, Inox DF 100 and Inox DF 113. The Company offers various services, which include infrastructure support and capabilities, operations and maintenance, and customer relationship management (CRM). The Company offers wind energy solutions and provides servicing to independent power producer (IPPs), Utilities, Public Sector Undertaking (PSUs), Corporates and Retail Investors. The Company also manufactures Blades and Tubular Towers, and Hubs and Nacelles. The Company has over three manufacturing plants located in Gujarat, Himachal Pradesh and Madhya Pradesh.

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INE066P01011 National Stock Exchange of India India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Analysts

Shirish Rane

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Inox Wind's Q1FY19 results (Outperformer) - Start of execution; Turning corner

Inox Wind Ltd: 1 director

An unfavourable environment weighs on INOX WIND, which sees a downgrade to Slightly Negative

Inox Wind's Q3FY20 results (Underperformer) - Execution continues to be sluggish

GMR Infrastructure's Q3FY20 results (Outperformer) - Air traffic growth improved at the airports; deleveraging process gains momentum

Ambuja Cement's Q4CY19 results (Outperformer) - In line; cost efficiencies at play

Event update: Aurobindo Pharma (Outperformer) - Unit IV receives EIR; positive outcome

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