Inox Wind's Q4FY18 results (Upgrade to Outperformer) - Strong order book
Q4FY18 result highlights
- INOX reported strong order inflow of 950MW under the auction regime in FY18. During the quarter, it won 350MW of order- 200MW in SECI Round 3, 100MW under SECI Round 4 and 50MW under Maharashtra state auction. As a result, Order book has improved to 950MW. Till date, its market share under the auction regime is healthy at 12.5% (950MW out of 7500MW). Note that all orders under the auction are yet to be awarded.
- Operating metrics and financial metrics for INOX suffered immensely in FY18 owing to the transition of Industry from Feed in Tariff regime to auction regime. As a result, Q4FY18/FY18 execution was mere 0MW/8MW (vs 94MW/522MW in Q4FY17/FY17) while it commissioned 82MW/172MW in Q4FY18/FY18 (vs 422MW/656MW in Q4FY17/FY17).
- Consequently, INOX sales declined to Rs2bn/4.8bn in Q4FY18/FY18, decline of 80%/86 yoy. EBITDA came in at loss of Rs298m/Rs813m in Q4FY18/FY18. INOX reported fourth consecutive quarterly loss of Rs557m (est of profit of Rs257m). FY18 loss was Rs2bn.
- INOX net receivables declined to Rs10bn as on March 18, a reduction of Rs14bn from March 17 and Rs3bn from December 17.
Key positives: Strong order inflow of 950MW in FY18; Potential auction pipeline of 10GW in FY19 and FY20; Decline in receivables
Impact on financials: We upgrade our earnings estimates in FY19/FY20 by 23%/8% as we increase our execution to 600MW/618MW in FY19E/FY20E (vs 550MW each) (EBITDA margin of 13% in FY19 & FY20)
Valuations & view
With a successful transition from feed in tariff to auction regime, wind power Industry is poised to grow in FY19E and FY20E on the back of 7.5GW of auction in FY18 and pipeline of 10GW/year auction in FY19E and FY20E. INOX will be one of the key beneficiaries as evident in healthy order wins for INOX under auction regime. INOX has entered FY19E with a very strong order book of 950MW. As a result, we estimate that INOX will report a profit of Rs2bn/Rs2.5bn in FY19E/FY20E. INOX is currently trading at 10xFY19, which is very cheap considering sharp jump in earning trajectory. We upgrade the stock to Outperformer with a revised target price of Rs136/share (12xFY20E P/E).
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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