Inox Wind (IWL) is one of India’s leading wind power solutions provider, manufacturing wind turbine generators (WTGs) and providing turnkey solutions by supplying WTGs and offering services including wind resource assessment, site acquisition, infrastructure development, erection, commissioning and O&M of wind power projects. IWL currently has a market share of 7% in FY14 with an annual production capacity of 800 MW (in-house capability to manufacture nacelles, hubs, rotor blades and towers), which it plans to double to 1600 MW by FY16. Hence, the company has proposed an IPO worth Rs 1024-1056 crore (fresh issue of Rs 700 crore) for expansion and working capital requirements. With a strong backlog of 1258 MW (~Rs 7500 crore), margin profile (EBITDA of 16%) and RoEs (31% in FY14), IWL is expected to clock a healthy financial performance over FY15-17E. Hence we recommend SUBSCRIBE.
Government thrust on renewables bodes well for WTG industryRecent policy initiatives indicate the strong government thrust on augmenting renewable capacity. Our stance is reiterated by recent measures like reintroduction of accelerated depreciation benefit (AD) and generation based incentives (GBI) after it was withdrawn in FY12-13, SAD exemption on raw materials imported for WTG manufacture and preferential tariffs for procurement of renewable energy by distribution.
Robust backlog, strong technology tie-up augur well for visibilityStrong backlog of 1258 MW or Rs 7500 crore renders solid revenue visibility for IWL in FY15-17E. Robust EBITDA margins (16%) will further ensure a strong earnings trajectory, going ahead. Expansion of capacity to 1600 MW by FY16E will further augment the product offering by IWL, thereby helping it to take on competition. Hence, timely execution of current backlog and expansion plans will ensure quality earnings profile for IWL.
Strong earnings growth, return ratios may lead to gains in medium term"With an established in-house manufacturing capacity and robust growth outlook, we believe IWL is on a strong growth footing. Though optically the stock is trading at 54x on FY14 PAT, we believe the underlying earnings growth (indicated by 1258 MW of backlog) in FY15E-17E and thrust of the government on renewables will make valuations look attractive. It does provide investors an opportunity to invest in a pure play renewable energy company. Hence, we recommend SUBSCRIBE", says ICICIdirect.com research report.
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