Inox Wind: Axis Securities initiates coverage with ’buy’ rating; projects 31% upside - 5 key reasons

Domestic brokerage firm Axis Securities has initiated coverage on Inox Wind, a fully integrated wind energy solutions provider, with a 'buy' rating and set a target price of ₹185 per share. This target indicates a potential upside of 31% from the stock's recent closing price of ₹141.

According to the brokerage, Inox Wind is strategically poised to capitalise on the expanding Indian wind sector. The company's strengths, including a strengthened balance sheet and a robust order book of 2.7 GW across diverse customer segments, are highlighted. Additionally, its operational and maintenance arm, Inox Green Energy Services Ltd., boasts strong margins exceeding 45%.

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The brokerage underscores India's robust strategy to increase its wind power capacity by approximately 75 GW by FY32, expanding from the current base of 46 GW. Inox Wind's technological readiness, including its transition from 2 MW to 3-3.3 MW turbines and progress in developing the 4.X MW WTG platform strategically situates the company for future growth in the sector, it noted. 

The following are the key factors highlighted by the brokerage in its note:

Strong Order Book: According to the brokerage, Inox Wind possesses a robust order book, standing at 2.7 GW as of March 31, 2024, slated for completion over the next 2.5 years. This order book comprises diverse customers, including PSUs, IPPs, and the C&I market, with a healthy mix of turnkey projects and equipment supplies.

The brokerage noted that the company also has multiple IPP and C&I orders in advanced stages of closure.

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The Ramp-up in Execution: In FY24, the company’s execution stood at 376 MW as compared to 104 MW in FY23, indicating a 262% YoY jump in execution. With the large order book, the company expects higher order execution from FY25 onwards (guidance of 800/1,200 MW for FY25/26E) with a target of 2 GW of annual execution in the medium term.

Axis Securities affirmed that the company has the necessary capability and supply chain readiness to handle higher MWs, citing its successful commissioning of 786 MW in FY16 during the peak of the wind sector.

Technological Advancement: The company has ramped up the manufacturing of 3 MW wind turbines and successfully transitioned to 3 MW wind turbines from 2 MW. It has also secured the license for a 4.X MW wind turbine platform. The 4.X MW wind turbine with a large rotor diameter for low-wind sites will be a revolutionary product in India.

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Financial Performance: The company faced losses during FY19–24 due to reduced execution linked to lower wind capacity additions under the reverse bidding auction regime initiated in FY18, compounded by the impact of COVID-19 in FY21–22.

However, the brokerage anticipates a return to profitability from FY25 onwards, driven by higher execution levels supported by the robust order book. It forecasts a revenue and EBITDA CAGR of 75% over FY24–27E and expects PAT to increase to ₹1,081 crore in FY27E from a loss of ₹51 crore in FY24. The brokerage also projects an EBITDA margin of 15%, aligning with the company's guidance range of 14–15%.

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Nil Interest-bearing Debt on the Books: The brokerage highlighted that Inox Wind has achieved a net debt-free status following a series of promoter fund infusions totaling ₹2,940 crore over FY23–25, effectively eliminating interest-bearing debt from its books.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.