Inox Wind Ltd’s (IWL) 1QFY17 results were below our estimates both in terms of revenue (adverse mix) and extended net working capital (180 days vs. 82 days as on Mar-16). The management clarified that mismatch in supply of individual parts (blades, towers, nacelles & hubs) had led to the buildup of receivables so far. To correct the same, it focused only on manufacturing the balance part of supplies in 1QFY17 leading to lower revenues/ utilisation. With this anomaly getting cleared now, it expects a substantial pick up in volumes and reduction in working capital by end of 1HFY17. Gradual improvement in working capital (over FY17) should enable it to be a net cash company by FY17-end.

Notwithstanding short term ups and downs, long term visibility on WTG volumes remain high given the expected policy on repowering and hybrid model (wind + solar). A bid based tender for 1GW is expected to open in the next 2 months providing further visibility on FY17E WTG volumes. Policy thrust coupled with technical advancements would continue to drive wind sector and IWL would be a key beneficiary of the same. Retain BUY with a TP of Rs 475/sh (10x FY18E EV/ EBITDA).