Inox Wind's Q3FY18 results (Underperformer) - Another disappointing quarter
Q3FY18 result highlights
- INOX wind executed 10MW of orders in Q3 FY18 (vs 266MW in Q3FY17) while it commissioned 4MW in Q3FY18 (vs 40MW in Q3FY17). During 9mFY18, it executed 10MW of orders (vs 428MW in 9mFY17) and commissioned 90MW (vs234MW in 9mFY17)
- Consequently, INOX sales declined to Rs909m in Q3FY18, a decline of 92% yoy. As a result, EBITDA came in at a loss of Rs180m in Q3FY18 and INOX reported third consecutive quarterly loss of Rs461m (est of loss of Rs26 9m).
- Order book has improved to 600MW at end of Q3FY18. INOX Wind has received 250MW of order won by its subsidiary, under auction in SECI Round 1 auction and 50MW won by Adani Green under SECI Round 1. In addition, INOX Wind won another 250MW order by subsidiary under SECI auction round 2 and 50MW won by Adani Green under SECI auction round 2.
- INOX receivables stayed at the elevated levels at Rs14bn as on December 17 end, a reduction of Rs10bn from March 17. With approval of PPA in Karnataka, receivables are likely to come down significantly by end of March 18.
Key positives: 30% of order from winners under SECI Auction Round 1 and 2; Potential auction pipeline of 4.5GW by March 2018
Key negatives: No execution
Impact on financials: Downgrade our earnings estimates in FY18 to a loss of Rs1.1bn for FY18E from a loss of Rs463m as we expect Q4FY18 to be also a weak quarter
Valuations & view
In a market environment which is increasingly becoming more competitive, we believe the weak competitive positioning of INOX product and weak execution will continue to affect company as evident in significant loss of market share in FY17 and losses in 9mFY18. As a result, we expect INOX to report a loss in FY18 and expect earnings to recover by FY19 to Rs2.3bn (a decline of 23% to FY17 earnings). INOX is currently trading at 16x FY19 P/E, which is expensive considering weak earnings. We maintain underperformer with a target price of Rs115/share (15xFY19 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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