MOSL: INOX WIND (Under Review)-Results below estimates due to regulatory headwinds

​INOX WIND: Results below estimates due to regulatory headwinds

(INXW IN, Mkt Cap USD0.6b, CMP INR201, Under Review)

• 4QFY17 meaningfully below estimates: 4QFY17 sales fell 45% YoY to INR10.2b, much below our estimate of INR20b. Supplies were curtailed at 94MW (-71% YoY) as states stopped signing PPAs post end-Feb. Gross margin expanded 10.5% YoY to 36%, which, in turn, led to EBITDA margin of 21.5% (+530bp YoY; est. of 17%). PAT of INR1.2b (-37% YoY) came in lower than our estimate of INR2.5b. FY17 sales stood at 0.52GW (-37% YoY), while commissioning was at 0.7GW (-17% YoY).
  
• Order book at 0.3GW; low revenue visibility: INXW’s order book of 1.3GW (as of 3QFY17) has been reduced to 0.3GW, as the earlier order book was on feed-in tariff (FIT) basis, which is now redundant since states have stopped signing PPAs on FIT basis. Execution of this 0.3GW would start only in 3QFY18, implying limited sales visibility for next few quarters. Revenues beyond 3QFY18 would be determined by INXW’s ability to win fresh orders in the upcoming wind auction for 1GW. The company had ~150-200MW of orders under execution during 4QFY17 without PPAs, which have been reallocated to public tenders and private utilities with PPAs.
  
• Core net working capital (NWC) remains elevated: NWC stood at 153 days (185 days as of 3QFY17, 82 days as of 4QFY16). Debt as of 4QFY17 was INR15.3b, higher by INR1b v/s 4QFY16, primarily to fund working capital.