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During the quarter under review, Inox Wind Ltd’s (IWL) revenue de-grew by 11% on qoq basis due to lack of availability of substation for SEC-I & II orders, however situation has improved since February, and management expects to increase the commissioning activities, once substation is ready. On the margin front, EBIDTA margin improved to 15.7% in Q3FY19 as compared to 12% in previous quarter on account of stock adjustment.
* IWL has supplied component of 75MW during the quarter.
* During the quarter, IWL has received LOI of 501.6MW for current SEC-I-III, IV, V, VI and upcoming auction under SECI from Adani Green Energy.
* Recent issue of land allocation in Gujarat has delayed the execution of few SEC-I orders, however, post intervention of Ministry of New and Renewable Energy, Gujarat state government has come up with land allocation policy. We expect the situation will improve going forward.
* Key things to watch out for in the near term are (a) execution pick up, (b) resolution of land allocation issue and (c) order inflow. However, by looking at the government’s ambitious target to auction 10GW of wind capacity every year till FY2028, our outlook for the sector is positive in the long term.
Outlook and Valuation:
Considering the changing dynamics of renewable energy consumption and government’s thrust to auction 10GW wind capacity by year 2028, we are bullish on the sector, and hence, have a positive outlook on IWL. At the CMP of `68, stock is available at PE multiple of 5.3x its FY2020E EPS of `13. We recommend a BUY with revised target price from `120 to `110 on account of delay in commissioning of order.
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