IDFC Securities - Inox Wind (INOXWIND) Inox Winds Q3FY19 results (Outperformer) - Pick up in execution delayed

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IDFC Securities

Shirish Rane

Inox Wind's Q3FY19 results (Outperformer) - Pick up in execution delayed

Q3FY19 result highlights

Despite a healthy order book of on the back of auction of 11 GW in last 18 month, order execution is marred by evacuation challenges and land allotment issues, which have led to a delay in SECI I and II order execution.
As a result, INOX order execution was sluggish at 74MW in Q3FY19 and 244MW in 9mFY19. INOX has started execution of SECI 1 and 2 orders from Q1FY19. SECI 1 – 300MW order is likely to be executed by Q4FY19 while SECI 2 and part of SECI 3 orders are likely to be executed by FY20E.
As a result, INOX reported sales of Rs3.9 bn in 3QFY19, whereas EBITDA came in at Rs612m and PAT at Rs17m (vs est profit of Rs357m).
INOX has announced its largest order of 502MW from Adani Green during the quarter. As a result, its order book grew to 1.2GW. The order book constitutes of order from SECI, 1, 2, 3 and 4 tranches. INOX has received total orders of 706MW from Adani Green from projects won under SECI tranche 1, 2, 3 and 4.
Going forward with Gujarat finalizing land allotment policy and increased transmission evacuation capacity being commissioned by Mar19, we expect a pickup in execution in FY20E

Key positives: Strong order book of 1206MW

Key negatives: Sluggish execution (Execution flat QoQ)

Impact on financials: We have downgraded our earnings estimates for FY19E/FY20E to Rs264m/Rs1.5bn; introduce our earnings estimates of Rs2.3bn in FY21E

Valuations & view

INOX Wind (INOX) is set for a turnaround after a disappointing FY18 (industry wind power installations fell 40% yoy to 1.8GW) as seen from the 9mFY19 results. We believe the transition from Feed in Tariff (FiT) to auction regime will help turn the tide in the wind power industry in FY20E. We believe FY20E will be promising for INOX, boosted by the company’s order book of 1.2GW and robust auction pipeline of bids. INOX is suitably placed to reap the benefits from the new regime, resulting in PAT of Rs1.8bn/Rs2.3bn in FY20E/FY21E. We reiterate our Outperformer rating on the stock with a revised target price of Rs98/share (12x FY20E P/E).

12/02/2019 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 Q3FY19 results (Outperformer) - Pick up in execution delayed

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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