1) Inox Wind's 1QFY17 revenues and profits declined significantly due to a realignment of production to reduce working capital needs. Margins also declined due to lower plant utilization.
2) The company's order book remains strong at 1,240MW providing visibility for the year. Management expects a pickup in orders and volumes in the second half as states finalize tariffs and a new tender opens.
3) The analyst maintains a 'Buy' rating with a target price of Rs. 475 per share expecting volumes of 1,050MW and 1,250MW in FY17E and FY18E respectively.
1) Inox Wind's 1QFY17 revenues and profits declined significantly due to a realignment of production to reduce working capital needs. Margins also declined due to lower plant utilization.
2) The company's order book remains strong at 1,240MW providing visibility for the year. Management expects a pickup in orders and volumes in the second half as states finalize tariffs and a new tender opens.
3) The analyst maintains a 'Buy' rating with a target price of Rs. 475 per share expecting volumes of 1,050MW and 1,250MW in FY17E and FY18E respectively.
1) Inox Wind's 1QFY17 revenues and profits declined significantly due to a realignment of production to reduce working capital needs. Margins also declined due to lower plant utilization.
2) The company's order book remains strong at 1,240MW providing visibility for the year. Management expects a pickup in orders and volumes in the second half as states finalize tariffs and a new tender opens.
3) The analyst maintains a 'Buy' rating with a target price of Rs. 475 per share expecting volumes of 1,050MW and 1,250MW in FY17E and FY18E respectively.
1) Inox Wind's 1QFY17 revenues and profits declined significantly due to a realignment of production to reduce working capital needs. Margins also declined due to lower plant utilization.
2) The company's order book remains strong at 1,240MW providing visibility for the year. Management expects a pickup in orders and volumes in the second half as states finalize tariffs and a new tender opens.
3) The analyst maintains a 'Buy' rating with a target price of Rs. 475 per share expecting volumes of 1,050MW and 1,250MW in FY17E and FY18E respectively.
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 Financial Summary - Consolidated (Rs mn) Net Sales Adj. EBITDA APAT Diluted EPS (Rs) P/E (x) EV / EBITDA (x) RoE (%)
production (lower production of nacelles & hubs) to ease working capital needs. Gross margins improved 277bps YoY to 30.6% however EBITDA margin declined 611bps YoY to 10.0%, primarily on account of lower utilization. Strong order book at 1,240MW lends comfort to our volume estimate of 1,050MW for FY17E. IWL expects order inflows to improve in H2FY17E as (a) most states have finalized their tariffs and (b) expected bid based tender of 1GW. As guided, IWL has already realised ~Rs 2bn from Inox Renewables in 1QFY17. It expects the balance (Rs 0.7bn) to be received soon. Near-term outlook: We believe, the stock has bottomed out and provides attractive entry point for investors.
YoY (%) 4QFY16*
(32) 18,287 (58) 3,147 (85) 2,098 (77) 9.4
QoQ (%) (76) (86) (95) (94)
*1QFY17 and 1QFY16 numbers based on Ind AS norms. 4QFY16 numbers are based on prior AS.
FY15 27,090 4,249 2,724 12.3 15.6 10.4 29.9
FY16 44,141 7,106 4,654 21.0 9.1 7.3 28.8
FY17E 53,568 8,722 5,446 24.5 7.8 5.2 25.7
FY18E 64,594 10,888 6,998 31.5 6.1 4.1 26.5
Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>
INOX WIND : RESULTS REVIEW 1QFY17
Quarterly Financials: Snapshot - Consolidated
Revenues decline sharply as IWL realigns its production to reduce its working capital requirements
Gross margins improved
277bps YoY to 30.6% however EBITDA margin declined 611bps YoY to 10.0%, primarily on account of lower utilization
(Rs mn) Net Sales Material Expenses Employee Expenses Other Operating Expenses EBITDA Interest Cost Depreciation Other Income Forex Gain/(Loss) PBT Tax Reported PAT EO Items (Adj For Tax) APAT
*1QFY17 and 1QFY16 numbers are based on new Ind AS norms. 4QFY16 numbers are based on earlier AS. Source: Company, HDFC sec Inst Research
Margin Analysis - Consolidated
Material Expenses as % of Net Sales Employee Expenses as % of Net Sales Other operating expenses as % of Net Sales EBITDA Margin (%) Net Profit Margin (%) Tax Rate (%)
Conversion cycle worsens with increase in Inventory and debtors. However, the management expects the same to improve from 2QFY17 onwards.
Particulars
1QFY16 4,952 15,732 6,157 14,527
Inventories (a) Debtors (b) Payables (c) Net (a+b-c)
Source: Company, HDFC sec Inst Research
Key Assumptions & Estimates - Consolidated
Expecting volumes of 1,050 MW and 1,250 MW for FY17E and FY18E respectively, we reiterate our BUY rating with a TP of Rs 475/share.
Rs mn Volume (MW) Realisation (Rs mn/MW) WTG Revenue OMS Revenue Net Revenue (incl other op income)
Rs mn 4QFY16 5,416 24,143 11,778 17,781
1QFY17 6,884 24,176 8,017 23,043
1QFY16 96 182 107 171
No of days 4QFY16 40 148 105 83
1QFY17 172 197 125 244
FY14 330 46.8 15,447 43 15,668
FY15 578 46.7 26,980 47 27,090
FY16 826 53.1 43,835 230 44,141
FY17E 1,050 50.4 52,971 506 53,568
FY18E 1,250 50.8 63,500 993 64,594
Gross Profit GPM (%)
3,483 22.2
6,743 24.9
11,362 25.7
13,852 25.9
16,980 26.3
EBITDA EBITDA Margin (%)
1,763 11.3
4,249 15.7
7,106 16.1
8,722 16.3
10,888 16.9
Capex Net debt/ (cash)
498 5,076
730 1,647
3,931 9,271
600 2,585
600 2,172
Source: Company, HDFC sec Inst Research
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INOX WIND : RESULTS REVIEW 1QFY17
Peer Valuations Company Carborundum Universal Crompton Greaves Cummins India Inox Wind Kalpataru Power * KEC International L&T Suzlon Energy Techno Electric Thermax Triveni Turbine Voltas
(Rs mn) SOURCES OF FUNDS Share Capital Reserves Total Shareholders Funds Long Term Debt Short Term Debt Total Debt Net Deferred Taxes Long Term Provisions & Others TOTAL SOURCES OF FUNDS APPLICATION OF FUNDS Net Block CWIP Investments LT Loans & Advances Total Non-current Assets Inventories Debtors Other Current Assets Cash & equivalents Total Current Assets Creditors Other Current Liabilities & Provns Total Current Liabilities Net Current Assets TOTAL APPLICATION OF FUNDS
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
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INOX WIND : RESULTS REVIEW 1QFY17
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List of Key Financial Ratios: Formulas and Calculation Examples Defined for Different Types of Profitability Ratios and the Other Most Important Financial Ratios
List of Key Financial Ratios: Formulas and Calculation Examples Defined for Different Types of Profitability Ratios and the Other Most Important Financial Ratios
