Inox Wind - 4QFY2015 Result Update - Angel Broking

For 4QFY2015, Inox Wind (IWL) reported a strong set of numbers. Its top-line grew by 34.9% yoy to Rs. 930cr, led by supply of 198MW of wind turbine generators (WTGs) during the quarter as against 132MW of WTGs supplied during 4QFY2014. The EBITDA during the quarter came in at Rs. 170cr, an increase of 212% yoy, due to lower EPC cost and other expenses. Hence, the EBITDA margin improved by 1,040bp yoy to 18.3%. Despite higher tax payment, the profit improved by 156.5% yoy to Rs. 118cr during the quarter.

Strong order book to boost performance: IWL has delivered a strong volume growth of 75.2% during FY2015, wherein it has sold 578MW of WTGs as against 330MW sold during FY2014. It has received orders worth 124MW during the quarter and its order book as of FY2015 stands at 1,178MW, having an execution period 12-15 months. IWL's current order book is in excess of 1,400MW, thus providing strong revenue visibility for FY2016. The company also has project sites worth in excess of 4400MW, which have been acquired or are under various stages of acquisition. Thus, IWL has a healthy revenue visibility in the medium term.

Government focus towards renewable energy: The government has set a target of installed wind power capacity of 60,000MW, to be attained by FY2022, from the current capacity of ~23,500MW. This will create a huge opportunity for the company in the upcoming period. Hence we expect order inflow to increase at a faster pace during the next few years. We estimate an industry order flow of 5,000-6,000MW per annum as against the current addition of 2,000MW per annum. The government has provided various incentives and framed several rules and regulations to increase demand for renewable energy.

Outlook and Valuation: We forecast IWL's top-line to grow at a CAGR of 48.1% during FY2015-17, on the back of aggressive capacity expansion, strong order book and large project sites. We expect EBITDA margin to improve to 17.5% by FY2017 on the basis of higher realization for larger rotor blades and no royalty payment burden from FY2016 onwards. The stock is currently trading at 13.7x its FY2017E EPS; given the attractive valuation we recommend a Buy rating on the stock. We have assigned a multiple of 16x to its FY2017 EPS of Rs. 31.6 to arrive at a target price of Rs. 505.

Source : Equity Bulls

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