Inox Wind |2QFY2019 Result Update

November 10, 2018

INOX Wind Ltd.

BUY

CMP

`90

Target Price

`120

Quarterly (` cr)

Q2FY19

Q2FY18

% yoy Q1FY19

% qoq

Investment Period

12 Months

Net sales

437

449%

430

EBITDA

-20

-25%

Stock Info

Sector

Capital Goods-Wind

EBITDA margin (%)

12.1%

-25.4%

16.4%

-422

Market Cap (` cr)

1,997

Adjusted PAT

1.52

-70.60

10.44

-85%

Beta

1.3

52 Week High / Low

158/73

During the quarter under review, Inox Wind Ltd. (IWL) has reported flattish growth in revenue

Avg. Daily Volume

25,125

on qoq basis at INR 437 cr from INR 430 cr. However, EBIDTA/ PAT (INR 53 cr., (-25%

Face Value (`)

BSE Sensex

35,158

qoq)/INR 1.52cr (-85% qoq)) declined drastically. EBIDTA margin fell by 422bps to 12.13%

Nifty

10,585

Reuters Code

INWN.BO

from 16.35% during the same period on account of forex loss of INR 5 cr as against forex

Bloomberg Code

INXW IN

gain of INR 2 cr in previous quarter and increases in other expenses such as payment of royalty

against purchase of turbines and job handling charges.

Shareholding Pattern (%)

Promoters

75.0

o IWL has delivered 170MW of wind turbines during H1FY2019 and left with an order

MF / Banks / Indian Fls

0.8

book of 780MW, which is executable by FY2020-21. During the quarter, it has

FII / NRIs / OCBs

7.6

delivered 90MW as against 80MW in Q1FY19. Further, IWL is in the advanced stage

Indian Public / Others

16.6

to conclude 600MW order from various IPPs.

o Key things to watch out for in the near term are (a) execution pick up, (b) meaningful

Abs.(%)

1yr

3yr

reduction in debt level and (C) order inflow. However, by looking at the government’s

Sensex

0.03

12.6

25.3

ambitious target to auction 10GW of wind capacity every year till FY2028 our outlook

INOX Wind

(8.7)

(32.9)

(75.9)

for sector looks promising in long term.

3 Years Performance charts

Outlook and Valuation: Considering the changing dynamics of renewable energy

consumption and government’s thrust to auction 10 GW wind capacity every year by

400

350

2028, we are bullish on sector and hence have a positive outlook on IWL. At the CMP of

300

250

INR 90, stock is available at PE multiple of 5.8x its FY2020E EPS of INR 16. We

200

150

recommend a BUY on Inox Wind and assign a multiple of 7.5x to arrive at a target price

100

of INR 120 implying a potential upside of 33%.

Key Financial

Y/E March (` cr)

FY16

FY17

FY18

FY19E FY20E

Net Sales

4,451

3,415

480

3,005

4,036

% chg

(23)

(86)

526

Source: Capitaline Angel Research

Net Profit

461

303

-188

228

355

% chg

(30)

(34)

(162)

(221)

EBITDA (%)

16.0%

16.4%

-17.0%

15.0%

EPS (Rs)

-8

P/E (x)

-11

5.6

P/BV (x)

1.1

0.9

1.0

0.9

0.8

Kripashankar Maurya

RoE (%)

24.4

13.9

(9.4)

10.2

13.7

022 39357600, Extn: 6004

RoCE (%)

20.4

13.9

(4.7)

12.9

16.0

[email protected]

EV/EBITDA

3.8

5.0

(28.6)

5.0

3.6

November 10, 2018

Inox Wind |2QFY2019 Result Update

Exhibit 1: Q2FY19 Performance

In INR Cr

Q2FY19

Q2FY18

Q1FY19

YOY % QOQ%

Net Sales

437

430

449%

Total Income

437

430

449%

Total Expenditure

384

100

360

285%

Raw Material Consumed

265

251

5874%

Stock Adjustment

-4

NA NA

Purchase of Finished Goods

NA NA

COGS

261

253

970%

(Profit)/ Loss on Forex Transaction

-2

Employee Expenses

-8%

EPC,O&M, and common Infra Facility expenses

-5%

-27%

Other Expenses

269%

33%

As a % of sales

Raw Material Consumed

61%

58%

Stock Adjustment

-1%

25%

Purchase of Finished Goods

COGS

98%

550%

101%

Gross Margin %

40%

69%

41%

(Profit)/ Loss on Forex Transaction

-1%

Employee Expenses

585%

Other Expenses

25%

405%

20%

EBITDA

-20

-25%

Other Income

5.29

7.6

3.3

-31%

61%

Interest

39.34

44.5

39.1

-12%

PBDT

18.93

-57.08

34.55

-45%

Depreciation

16.49

22%

PBT

2.44

-70.60

18.19

-87%

Tax

0.92

-88%

PAT

1.52

-71

-85%

Ratios

BPS

EBITDA margin (%)

12.13% -25.44%

16.35%

NA -422.20

PAT margin %

0.35%

-88.79%

2.43%

-208

Tax rate %

37.70%

42.61%

-490

Source: Company, Angel Research

Q2FY2019 Key highlights of results

 During the quarter under review, Inox Wind Ltd. (IWL) has reported flattish

growth in revenue on qoq basis at INR 437 cr from INR 430 cr. However,

EBIDTA/ PAT (INR 53 cr., -25% qoq/ INR 1.52 cr (-85%) (qoq) declined

drastically;

 EBIDTA margin fell by 422bps points to 12.13% from 16.35% on account of

forex loss of INR 5 cr as against forex gain of INR 2 cr in previous quarter and

increases in other expenses such as payment of royalty against purchase of

turbines and job handling charges;

 IWL had to take the hit of foreign exchange fluctuation as most of the execution

for the company is happening from SECI-I and SECI-II, where there is no pass

November 10, 2018

Inox Wind |2QFY2019 Result Update

on benefit available. Currently, IWL import raw material roughly 30-35% of

revenue in three foreign currencies namely USD, EURO and YUAN; however,

the management is looking to change the import mix to a favourable currency.

We believe this move will help to improve IWL’s margins going forward;

 IWL has delivered 170MW of wind turbines during H1FY2019 and left with an

order book of 780MW, which is executable by FY2020-21. During the quarter,

it has delivered 90MW as against 80MW in Q1FY19. IWL is in the advanced

stage to conclude 600MW order from various IPPs.

Outlook & Valuation

Considering the changing dynamics of renewable energy consumption and

government’s thrust to auction 10 GW wind every year capacity by 2028, we are bullish

on sector and hence have a positive outlook on IWL. At the CMP of INR 90, stock is

available at PE multiple of 5.8x its FY2020E EPS of INR 15.6. We recommend a Buy on

Inox Wind and assign a multiple of 7.5x to arrive at a target price of INR 120 implying a

potential upside of 33%.

Risks to our estimates

Delay in auction

Any delay in auction of wind energy may leads to slowdown in sector hence create an

uncertainty in revenue visibility.

November 10, 2018

Inox Wind |2QFY2019 Result Update

Income statement

Y/E March (` cr)

FY16

FY17

FY18

FY19E

FY20E

Total operating income

4,451

3,415

480

3,005

4,036

% chg

(23)

(86)

526

Total Expenditure

3,737

2,855

561

2,555

3,430

Raw Material

2,716

1,920

1,863

2,502

Personnel

117

100

Loss on Forex Transaction

-19

-1

Others Expenses

908

836

416

631

847

EBITDA

713

560

-81

451

605

% chg

(22)

(21)

(115)

(654)

(% of Net Sales)

16.0%

16.4%

-17.0%

15.0%

Depreciation& Amortisation

EBIT

677

517

-134

396

546

% chg

(25)

(24)

(126)

(397)

(% of Net Sales)

-28

Interest & other Charges

155

171

115

Other Income

Extraordinary Items

Recurring PBT

649

427

-280

308

480

% chg

(24)

(34)

(166)

(210)

Tax

188

124

-93

125

PAT (reported)

461

303

-188

228

355

% chg

(46)

(34)

(162)

(221)

(% of Net Sales)

10.4

8.9

-39.1

7.6

8.8

Basic & Fully Diluted EPS (Rs)

-8

% chg

(97)

(34)

(162)

(221)

Source: Company, Angel Research

November 10, 2018

Inox Wind |2QFY2019 Result Update

Balance Sheet

Y/E March (`cr)

FY16

FY17

FY18

FY19E

FY20E

SOURCES OF FUNDS

Equity Share Capital

221.9

Reserves& Surplus

1,665

1,968

1,782

2,010

2,366

Shareholders Funds

1,887

2,190

2,004

2,232

2,588

Total Loans

1,437

1,528

831

Other Liabilities

113

355

Total Liabilities

3374

3831

2868

3418

3773

APPLICATION OF FUNDS

Net Block

569

765

985

1,062

1,098

Capital Work-in-Progress

112

Investments

Long Term Loans & Advances

Current Assets

3,895

3,938

2,708

3,275

4,012

Inventories

560

690

929

618

829

Sundry Debtors

2,409

2,382

1,339

2,059

2,432

Cash

494

437

127

368

466

Loans & Advances

304

Investments & Others

128

341

313

231

284

Current liabilities

1,404

1,324

1,230

1,163

1,579

Net Current Assets

2,491

2,614

1,478

2,112

2,432

Other Non Current Asset

260

270

370

203

202

Total Assets

3374

3831

2868

3418

3773

Source: Company, Angel Research

Cash flow

Y/E March (`cr)

FY16

FY17

FY18

FY19E

FY20E

Profit before tax

649

427

(280)

308

480

Depreciation

Change in Working Capital

283

(436)

(669)

316

237

Interest / Dividend (Net)

155

171

115

Direct taxes paid

188

124

(93)

125

Others

(1,418)

(200)

1,088

(351)

(553)

Cash Flow from Operations

(163)

114

269

522

443

(Inc.)/ Dec. in Fixed Assets

(404)

(290)

(186)

(272)

(99)

(Inc.)/ Dec. in Investments

(31)

(111)

302

Cash Flow from Investing

(968)

(5)

332

(272)

(99)

Issue of Equity

Inc./(Dec.) in loans

1,403

-697

Others

(901)

(71)

(63)

(245)

Cash Flow from Financing

501

(760)

(245)

Inc./(Dec.) in Cash

(630)

128

(159)

322

Opening Cash balances

706

204

368

Closing Cash balances

204

368

466

Source: Company, Angel Research

November 10, 2018

Inox Wind |2QFY2019 Result Update

Key Ratio

Y/E March

FY16

FY17

FY18

FY19E FY20E

P/E (on FDEPS)

-11

8.8

5.6

P/CEPS

-15

7.1

4.8

P/BV

0.9

0.8

EV/Sales

0.8

0.5

EV/EBITDA

-29

5.0

3.6

EV / Total Assets

4.0

3.8

Per Share Data (Rs)

EPS (Basic)

-8

10.3

16.0

EPS (fully diluted)

-8

10.3

16.0

Cash EPS

-6

12.7

18.7

DPS

0.0

Book Value

100.6

116.6

Returns (%)

ROCE

-5

12.9

16.0

Angel ROIC (Pre-tax)

-5

13.1

16.6

ROE

-9

10.2

13.7

Turnover ratios (x)

Inventory / Sales (days)

707

Receivables (days)

198

255

1018

250

220

Payables (days)

104

408

110

Working capital cycle (ex-cash) (days)

146

225

1317

215

185

Source: Company, Angel Research

November 10, 2018

Inox Wind |2QFY2019 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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Company Name

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November 10, 2018