Inox Wind Ltd. share price target

Top takeaways from Q1FY17 :  Inox Wind’s recurring PAT (Rs 103mn,  ?85% yoy) was materially below our and consensus estimates as lower than expected execution led to a negative operating leverage coupled with high interest costs on account of increased working capital. In 1Q Inox focused on clearing the backlog of production of relatively lower ASP components such as blades and towers while going slow in producing nacelles in order to synchronise component supply going ahead. This led to lower revenues. In addition, due to lack of clarity on tariff in the state of Gujarat clients withheld commissioning, which has subsequently picked up as the state announced its multiyear tariff only in August.

Outlook and Valuation: Based on the weak 1Q performance we cut our FY17/18 earnings estimates by 25% and 19% respectively. We downgrade our rating on the stock to Neutral (from Buy) and cut our price target to Rs 200 (Rs 360 earlier). The company has disappointed investor expectations for the past three quarters on execution, margins and working capital. Consequently, the stock has de?rated and the price has declined 50% in the past 12 months. For the stock to re?rate we believe Inox will have to deliver on reducing its net working capital (53% of TTM sales in 1QFY17) to offset the negatives of slowing industry growth due to a policy cliff in FY18. Since ~50% of FY17 sales will be generated from Gujarat based sites, which now have improved visibility on tariffs, we believe that Inox has a fair chance to reduce its working capital and this refrains us from downgrading the stock to Sell.

Inox Wind Ltd. (IWL) reported below than expected set of revenue and bottom-line numbers. IWL reported top-line of `1,828cr, below our expectations. Inox reported 96.9% yoy top-line increase, reflecting 328MW of Turnkey sale volume. On the back of strong execution IWL reported 83.3% yoy increase in EBITDA to Rs312cr. Reported EBITDA is be..

18.2bn (+97% yoy) were 9% above our estimate driven by strong execution and slippages frompreviousquarter.Increaseinexecutionofturnkeyprojectsin4Qledtoacompression ingrossmargins(670bpsyoy).However,operatingleveragebenefitsonhighersalesvolume...

4QFY16 above estimates driven by strong execution: 4QFY16 sales stood at INR18.3b (up 97% YoY) which was above our estimate of INR15.5b. Supplies during the quarter stood at 328MW which was up 67% YoY. EBITDA was at...

8 Earnings (Rs 1bn; flat yoy) were materially below our (Rs 1.5bn) and consensus' (Rs 1.4bn)estimatesbecauseofsalesslippagetoQ4FY16. 9 Grossmarginsexpanded850bpsyoymainlyonimprovedsalesmixinfavourofhigher...

Government thrust on renewable energy: Development of renewable energy is imperative for the energy security of our import dependant nation. As a result the Government has increased the target of renewable energy to 175 GW (60 GW wind) by 2022. It is also providing various incentives to increase investments in renewable energy like accelerated depreciation, generation based incentives of Re 0.5/unit, allowing wind power as a Corporate Social Responsibility activity, duty exemption on raw materials, etc. RBI has also notified loans of upto Rs 15 cr for installation of wind mills to be classified as priority sector lending. All these measures would result in higher investment...

Inox Wind Ltd (IWL) is one of India's leading wind power solutions provider, manufacturing wind turbine generators (WTGs) and providing turnkey solutions by supplying WTGs and...

9 Adjusted PAT (Rs 947mn) was 40% higher than our and consensus estimates, driven solelybystrongerthanexpectedexecution. 8 Sharpdeclineingrossmargins(530bpsyoy)wasduetoexecutionoflowmarginorders...

Currently, IWL has an installed capacity of 550 nacelles and hubs at Una, Himachal Pradesh, 400 rotor blade sets, and a capacity of 300 towers at Rohika, Ahmedabad, Gujarat. The company is setting up a new integrated capacity of 400 nacelles and hubs, 400 rotor blade sets, and 300 towers at Barwani, Madhya Pradesh. This would take the total nacelles and hubs capacity to 950 units, rotor blades capacity to 800...

Inox Wind's Q1FY16 PAT at Rs 587mn was above our estimate led by strong execution. Order book stood at 1.2GW and expansion of capacity to 1600MW from current 800MW lends visibility for growth in FY16. Management highlighted that the increase in...