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Volume to rise on soaring power demand

Volume upbeat as power demand soars and given favorable policy

Surging power demand, rising peak shortages and conducive policy interventions drove volumes on exchanges. Indian Energy Exchange (IEX IN) achieved 110BU volume in FY24, up 13.8% YoY. In Q4FY24, volume increased 15.5% YoY to 30.1BU. The day ahead market (DAM) segment registered 14,916MU volume in Q4FY24, up 4.3% YoY. DAM achieved 53,353MU volume in FY24, up 4.3% YoY. Volume for real time market (RTM) segment increased 26.95% YoY to 7,505MU. RTM achieved 30,125MU volume in FY24, up 24.6% YoY. Total volume in term ahead market (TAM) segment in Q4 was 3,511MU, up 19.3% versus Q4FY23. For FY24, the segment’s volume was 14,944MU, up 48% YoY. IEX is optimistic about buoyant trading volumes in FY25/26 on surging power demand. For a 7-8% rise in power demand, volume on IEX may rise 20%.

Earnings largely as estimated

Q4 consolidated revenue rose 13% YoY to INR 1,212mn, led by robust volume growth on the exchange. EBITDA rose 12.3% YoY to INR 1,045mn. Other income increased 24% YoY to INR 280mn. IEX’s profit share from associate (Indian Gas Exchange) declined to INR 21mn in Q4, from INR 35mn/55mn in Q3FY24/Q4FY23. Reported PAT rose 9% YoY to INR 966mn. FY24 revenue increased 15% YoY to INR 4.5bn. Reported PAT increased 15% YoY to INR 3.5bn. IEX has declared a final dividend of INR 1.5/share. It had earlier declared an interim dividend of INR 1/share. Hence, for FY24, it declared a total dividend of INR 2.5/share, resulting in a dividend yield of 1.6%.

Valuation: Reiterate Buy with a TP of INR 188

We retain our positive outlook on IEX, given the rise in short-term power market share in India along with an increase in the market share of power exchanges. Also, IEX’s subsidiary, Indian Gas Exchange, and the upcoming Carbon Credit Exchange offer an edge to the investors. Regulatory overhang in terms of market coupling and increased competition are key long-term concerns. We reiterate Buy with a DCF-TP of INR 188 on 30x FY26E P/E.

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