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09 MAY 2016
INOX WIND
BUY
ENGINEERING
CMP
Potential Upside
: Rs 242
: 28%
MARKET DATA
No. of Shares
Free Float
Market Cap
52-week High / Low
Avg. Daily vol. (6mth)
Bloomberg Code
Promoters Holding
FII / DII
: 222 mn
: 14%
: Rs 54 bn
: Rs 485 / Rs 217
: 293,518 shares
: INXW IB Equity
: 86%
: 3% / 5%
Q4 order inflow strong and pipeline remains robust: Order inflow during Q4 was strong at 360 MW, but given the
even higher commissioning of 402 MW, the company ended the quarter with a reduced order backlog of 1,104 MW
(down from 1,146 MW in Dec15). Management is confident of booking strong orders in FY17 on the robust
order pipeline.
Incentives on inter-state transmission to drive demand: Recently, the government has exempted renewable power from
inter-state transmission charges & losses. It should enable less-windy states (especially northern states) to meet their
Renewable Purchase Obligation (RPO) and offset plateauing demand from windy states.
Increase earnings and TP, upgrade to BUY: We keep our FY17E EPS unchanged and increase FY18E EPS to Rs 26
(vs. 24 earlier) on expected improvement in realization with higher share of new products (Hybrid tower and 113m dia
rotor). Our revised TP stands at Rs 310 (12x FY18E) vs. Rs 284 earlier.
Key drivers
FY15
FY16
FY17E
27,027
44,065
53,055
50,033
4,893
6,732
8,451
8,653
3,283
4,348
5,232
5,730
26.3
27.7
14.8
19.6
23.6
25.8
123.7
32.4
20.3
9.5
P/E (x)
16.3
12.3
10.3
9.4
RoE (%)
36.1
26.9
24.9
21.6
EV/E (x)
11.3
9.3
7.1
6.0
DPS (Rs)
FY18E
FY16
FY17E
FY18E
Volumes (MW)
826
940
850
Realization/MW
46.0
48.2
50.2
RM cost/MW
32.9
35.2
36.1
15.7%
16.6%
17.8%
EBITDA margin
Price performance
200
Sensex
Inox Wind
150
100
50
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
01
09 MAY 2016
Quarterly Update
INOX WIND
ENGINEERING
Mar-16
Net Sales
EBITDA
Other income
PBIDT
Depreciation
Interest
PBT
Tax
Adjusted PAT
Extra ordinary income/ (exp.)
Reported PAT
No. of shares (mn)
EBITDA margin (%)
PBIDT margins (%)
EPS - annualized (Rs.)
18,287
3,140
201
3,341
106
254
2,981
872
2,109
(17)
2,092
222
17.2
18.3
38.0
Quarter ended
Mar-15
% Chg
Dec-15
% Chg
9,414
1,545
150
1,695
86
201
1,409
378
1,030
1,030
222
16.4
18.0
18.6
94.2
103.2
34.3
97.1
23.3
26.7
111.6
130.4
104.7
103.1
76
26
104.7
96.6
84.3
422.9
91.8
88.3
60.6
95.1
149.9
78.9
77.5
(115)
(46)
78.9
9,301
1,704
39
1,742
56
158
1,528
349
1,179
1,179
222
18.3
18.7
21.2
12 months ended
FY17E
FY16
% Chg
53,055
8,451
700
9,151
504
1,577
7,070
1,838
5,232
(3)
5,232
222
15.9
17.2
23.6
44,065
6,732
665
7,397
334
960
6,103
1,755
4,348
(17)
4,332
222
15.3
16.8
19.6
20.4
25.5
5.3
23.7
51.0
64.3
15.8
4.7
20.3
20.8
65
46
20.3
25
20
250
(Rs bn)
176
177
174
178
210
200
15
150
10
100
50
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Commissioning (MW)
402
400
300
200
100
158
140
94
78
Mar-15
Jun-15
166
30
Sep-14
Dec-14
Sep-15
Dec-15
Mar-16
02
Quarterly Update
09 MAY 2016
INOX WIND
ENGINEERING
Madhya Pradesh contributed more than 30% of FY16 all-India new wind power
installations vs. ~5% historically. For IWL, the share of Madhya Pradesh was even
higher at ~2/3rd of its FY16 commissioning. New wind power installations in MP
saw a quantum jump (refer exhibit below) after the state raised the tariff from Rs
4.31/kWh to Rs 5.92/kWh and fresh capacity additions could decline with the
recent tariff cut in the state. IWL management expects to partially offset this tariff
decline with its new product offerings (120m hybrid tower, 113m turbines with hub
height 120m). MP constitutes ~25% of IWLs orderbook and ~15% of its wind sites.
FY12
FY13
FY14
FY15
FY16
1,083
175
114
181
197
204
202
189
316
240
373
209
Karnataka
Maharashtra
423
289
1,043
Rajasthan
546
614
99
525
688
45
202
336
255
440
Madhya Pradesh
101
10
37
453
1,292
Gujarat
791
208
273
195
386
3,207
1,686
2,090
2,298
3,460
Andhra Pradesh /
Telangana
Total
Exhibit 5: Recent 19% cut in MP feed-in tariff leads to uncertainty in the state but other states give hope
FY12
FY13
FY14
FY15
FY16
Current
Tariff
% change
4.31
4.31
5.92
5.92
5.92
4.78
-19%
Rajasthan
4.46
5.18
5.46
5.64
5.74
5.76
0%
Karnataka
All
3.70
3.70
4.50
4.50
4.50
4.50
0%
Gujarat
All
3.56
4.15
4.15
4.15
4.15
4.25-4.30*
2-3%*
3.37
3.37
3.37
3.37
4.83
4.84
0%
Maharashtra
Wind Zone 2
4.67
4.93
5.05
5.01
5.02
4.89
-3%
Tamil Nadu
All
3.40
3.51
3.51
3.51
3.51
4.16
19%
State
Zone / District
Source: State Electricity Regulatory Commission, Axis Capital; * Industry expectations as current feed-in tariff is awaited
03
Quarterly Update
09 MAY 2016
INOX WIND
ENGINEERING
1,200
1,000
AP
Gujarat
Karnataka
MP
Maharashtra
Rajasthan
Tamilnadu
Telangana
800
600
386
400
160
200
0
constituted ~2/3rd of
1, 004
182
Madhya Pradesh
900
790
279
125
520
commissioning
767
201
261
146
204
180
Gamesa
Suzlon
Inox Wind
Others
Exhibit 7: Wind equipment suppliers introducing new products with higher yield to offset
tariff decline
Lower cost of
energy
High energy
yielding
20%
18%
WT 93
High Returns
WT 100
WT 113
04
09 MAY 2016
Quarterly Update
INOX WIND
ENGINEERING
Exhibit 8: WTG market has consolidated significantly with Top 3 players with >2 MW
products gaining market share
Manufacturer
FY12
FY13
FY14
FY15
FY16
56%
48%
49%
63%
78%
Gamesa
10%
6%
19%
29%
29%
Suzlon
36%
24%
19%
20%
26%
Inox
2%
15%
7%
12%
23%
Vestas
8%
3%
4%
2%
0%
44%
52%
51%
37%
22%
Regen Powertech
13%
16%
16%
16%
9%
Wind World
24%
26%
17%
10%
5%
RRB
1%
0%
0%
1%
1%
Others
6%
10%
18%
10%
7%
14,497
35,071
13,593
2,931
5,961
5,050
14,152
102,788
1,478
4,028
2,880
2,169
4,647
3,996
7,654
26,900
05
Quarterly Update
09 MAY 2016
INOX WIND
ENGINEERING
FY16
FY17E
FY18E
Y/E March
FY15
FY16
FY17E
FY18E
27,027
44,065
53,055
50,033
4,210
6,103
7,070
7,743
72
76
76
76
(204)
(334)
(504)
(549)
27,099
44,141
53,131
50,109
(6,291)
(8,621)
(2,278)
2,435
(20,961)
(33,645)
(40,468)
(37,326)
(2,185)
(2,996)
5,034
9,775
6,138
10,496
12,663
12,783
(730)
(3,931)
(800)
(500)
22.7
23.8
23.9
25.5
(1,245)
(3,765)
(4,212)
(4,131)
4,893
6,732
8,451
8,653
Capital expenditure
Cash flow from investing
(903)
(5,512)
(2,377)
(1,560)
6,678
3,939
5,897
(3,000)
(4,000)
18.1
15.3
15.9
17.3
Dividend paid
Depreciation
(204)
(334)
(504)
(549)
4,690
6,398
7,947
8,103
(622)
(960)
(1,577)
(1,060)
143
665
700
700
4,210
6,103
7,070
7,743
(927)
(1,755)
(1,838)
(2,013)
EBIT
Net interest
Other income
Profit before tax
Total taxation
10,018
5,897
(3,000)
(4,000)
6,930
(2,611)
(342)
4,215
FY15
FY16
FY17E
FY18E
Key ratios
Y/E March
OPERATIONAL
22.0
28.8
26.0
26.0
FDEPS (Rs)
14.8
19.6
23.6
25.8
3,283
4,348
5,232
5,730
CEPS (Rs)
15.7
21.0
25.8
28.3
DPS (Rs)
3,283
4,348
5,232
5,730
12.1
9.9
9.9
11.5
(3)
(17)
3,280
4,332
5,232
5,730
GROWTH
Net sales (%)
74.4
63.0
20.4
(5.7)
EBITDA (%)
177.5
37.6
25.5
2.4
148.2
32.4
20.3
9.5
FDEPS (%)
123.7
32.4
20.3
9.5
RoE (%)
36.1
26.9
24.9
21.6
RoCE (%)
30.3
25.3
25.2
24.3
PERFORMANCE
Y/E March
FY15
FY16
FY17E
FY18E
Paid-up capital
2,219
2,219
2,219
2,219
11,700
16,219
21,451
27,181
EFFICIENCY
Net worth
13,919
18,438
23,670
29,400
2.2
2.0
1.8
1.7
Borrowing
8,743
14,640
11,640
7,640
1.2
1.1
1.1
1.0
(15)
101
101
101
31,948
47,295
52,179
52,656
2,550
6,972
7,772
8,272
Inventory days
69.7
52.8
53.4
54.3
Less: Depreciation
(522)
(856)
(1,360)
(1,909)
Payable days
143.9
133.0
132.2
131.7
2,028
6,116
6,412
6,363
491
1.0
0.9
0.6
0.3
2,519
6,116
6,412
6,363
0.2
0.6
0.3
(0.1)
0.4
0.4
0.4
0.5
193.4
200.0
190.0
185.0
FINANCIAL STABILITY
622
622
622
3.2
2.9
2.7
2.9
4,238
5,416
6,541
6,168
7.5
6.7
5.0
7.6
14,322
24,143
27,617
25,359
7,096
4,788
4,445
8,660
PE (x)
16.3
12.3
10.3
9.4
3,436
5,534
5,814
4,798
11.3
9.3
7.1
6.0
9,301
14,116
16,768
15,515
2.0
1.4
1.1
1.0
20,129
26,441
28,377
30,156
PB (x)
3.9
2.9
2.3
1.8
(5.4)
(12.9)
7.9
17.3
Current liabilities
Net current assets
Other non-current assets
Total assets
Source: Company, Axis Capital
31,949
47,295
52,179
52,656
VALUATION
06
09 MAY 2016
Quarterly Update
INOX WIND
ENGINEERING
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the
Regulations).
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as defined in the Regulations, is engaged in the business of providing Stock broking services, Depository participant services &
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and one of Indias largest private sector bank and has its various subsidiaries engaged in businesses of Asset management, NBFC,
Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of which are available on www.axisbank.com.
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Sr. No
Name
Designation
Sunil Shah
Head of Research
sunil.shah@axissecurities.in
PankajBobade
Research Analyst
pankaj.bobade@axissecurities.in
Priyakant Dave
Research Analyst
priyakant.dave@axissecurities.in
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Research Analyst
akhand.singh@axissecurities.in
BuntyChawla
Research Analyst
bunty.chawla@axissecurities.in
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07
09 MAY 2016
Quarterly Update
INOX WIND
ENGINEERING
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08