Hold Indian Energy Exchange Ltd For Target Rs. 136 - ICICI Direct
Muted performance…
About the stock: Indian Energy Exchange (IEX) is the premier electricity exchange in India, which facilitates trading of electricity
* IEX commands a market share of ~85-90% in the power exchange market
* The company has a debt free balance sheet with cash & investments to the tune of ~ | 340 crore
Q3FY23 Results: IEX reported decent Q3FY23 results
* For Q3FY23, IEX reported revenues of | 100.3 crore vs. our estimate of | 98.9 crore
* EBITDA for the quarter was at | 83.3 crore vs. our estimate of | 85 crore
* Consequent PAT in Q3FY23 was at | 71.2 crore, down 12% YoY
What should investors do? IEX is a structural play on volumes sifting from the long term PPA market to the spot market. The company has been aggressive in launching new products regularly.
* We maintain our HOLD rating on the stock
Target Price and Valuation: We value IEX at | 136 i.e. 37x P/E on FY24E EPS.
Key triggers for future price performance
* Introduction of longer duration delivery base contracts in power exchanges
* Launch of Hindustan Power Exchange, which will increase the competition and may negatively impact its volumes
* Launch of National Open Access Registry and derivatives contracts in H2FY23
Alternate Stock Idea: NTPC is India’s largest power generation company with a total installed capacity of 70234 MW at the group level
* NTPC has 17% of total installed capacity in India with 23% generation share. BUY with a target price of | 190
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