Inox Wind (IWL) reported a strong set of numbers for 2QFY2016. Its top-line grew by
85.6% yoy to Rs1,008.2cr, led by 212MW of wind turbine generator (WTG) sales (increase
of 86% yoy) during the quarter as against 114MW of WTGs supplied during 2QFY2015.
The commissioning of the 140MW of WTG (increase of 367% yoy) during the quarter (as
against 30MW in 2QFY2015) also contributed to the revenue. The EBITDA during the
quarter came in at Rs137cr, an increase of 57.6% yoy; however, the same is lower than our
estimate of Rs152.4cr. Its EBITDA margin fell by 242bp yoy to 13.6% and the same is below our
estimate of 15.3%. The decline in the EBIDTA margin was largely due to increase in the share of
commissioning revenue. The Net profit improved by 63.5% yoy to Rs89.1cr, during the quarter.
Strong order book to boost performance: IWL received new orders worth 194MW during
the quarter, and as of September 2015 the order book stands at 1,202MW, down by 1.5%
against 1,220MW during June 2015. The strong order book provides revenue visibility over
the next 12-15 months. The company also has project sites worth in excess of 5,000MW,
which have been acquired or are under various stages of acquisition. Thus, IWL has a
healthy revenue visibility in the medium term.
EBIDTA rises by 57.6% yoy: IWL reported an EBIDTA of Rs137cr for the quarter as against Rs87cr during
2QFY2015, thus registering a growth of 57.6% yoy. However, the EBIDTA margin for the quarter
came in at 13.6% (our estimate was of 15.3%) as against 16% during 2QFY2015, a dip of 242bp
yoy. The margin decline was mainly due to rupee deprecation impacting raw material cost and
increase in the share of the relatively lower margin commissioning segment to the overall revenue.
Going forward, margin is expected to improve on account of higher supply of 100 meter
blades as against 93 meters being currently supplied. Further it will introduce larger 113
meter blades later during FY2016. We expect this higher blade segment to account for 50% of its
business, going forward. The larger blades would get higher realizations and would improve the overall
margin further. We expect IWL’s margin to improve from 16.9% in FY2015 to 17.5% by FY2017.
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 from larger rotor blades and no royalty payment burden from FY2016 onwards.
The stock is currently trading at 12.4x its FY2017E EPS. Given the attractive valuation, we
maintain our Buy rating on the stock. We have assigned a multiple of 16x to its FY2017 EPS
of Rs31.6 to arrive at a target price of Rs505.
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