Inox Wind's Q4FY19 results (Outperformer) - Execution disappoints
Q4FY19 result highlights
- Delay of grid infrastructure and land policy in Gujarat has led to disappointment in work for the auctions under SECI 1 and SECI 2, thus affecting the revenues for the wind OEMs
- The improvement envisaged in execution in FY19 at the beginning of the year has not materialised. Note that the transition from feed in tariff has adversely impacted FY18 and continued to impact adversely in FY19
- As a result, INOX reported sale of Rs1.8bn in Q4FY19, decline of 12% yoy and sale of Rs14.4bn in FY19, an increase of 200% yoy led by execution of SECI I orders. EBITDA reported a loss of Rs283m (vs est of Rs598m, Q4FY18 loss of Rs298m) and Rs1.5bn in FY19 (vs loss of Rs813m in FY18).
- Consequently, INOX reported a loss of Rs535m in Q4FY19 and Rs400m in FY19 (vs loss of Rs1.9bn in FY18)
- INOX reported strong order inflow of 565MW (out of which 500MW is LOI from Adani Green). Total order book at end of FY19 stands at 1251MW (order value of Rs70bn). Given that execution infrastructure is ready, 600MW is expected to be commissioned in next 12 months
Key positives: Declining competitive intensity
Key negatives: Disappointment in execution led by grid infrastructure and land issues
Impact on financials: Downgrade our earnings estimates for FY20 and FY21E by 8% and 5% as we account for higher working capital loan
Valuations & view
INOX Wind (INOX) had a disappointing FY18 and FY19 as industry wind power installations fell 40% yoy to 1.8GW in FY18 and 1.5GW in FY19. 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 Rs1.7bn/Rs2.1bn in FY20E/FY21E. We reiterate our Outperformer rating on the stock with a revised target price of Rs90/share (12x FY20E 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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