Quarterly Update

09 MAY 2016

INOX WIND

BUY

ENGINEERING

Target Price: Rs 310

Q4 in line; working cap concerns overdone

Inox Winds Q4FY16 PAT at Rs 2.1 bn (up 79% YoY) was broadly in
line with our estimate. Revenue at Rs 18.3 bn was up 97% YoY driven
by strong sales volume of 328 MW (up 106% YoY) and commissioning
of 402 MW (up 328% YoY). EBITDA margin at 17.2% beat our
estimate but was down 110 bps YoY. While equipment realization was
up 7% YoY to Rs 46.5 mn/MW on better mix, overall EBITDA margin
declined due to higher share of turnkey revenues in the quarter.
Working capital remains high but should ease in Q1: NWC at
178 days in Mar16 was broadly flat vs. 176 days in Mar15 but trade
receivables increased to 200 days vs 193 days YoY. Management
attributed the increase to seasonally strong sales in Q4 and expects it to
come down in Q1.

CMP
Potential Upside

: Rs 242
: 28%

MARKET DATA
No. of Shares
Free Float
Market Cap
52-week High / Low
Avg. Daily vol. (6mth)
Bloomberg Code
Promoters Holding
FII / DII

: 222 mn
: 14%
: Rs 54 bn
: Rs 485 / Rs 217
: 293,518 shares
: INXW IB Equity
: 86%
: 3% / 5%

Q4 order inflow strong and pipeline remains robust: Order inflow during Q4 was strong at 360 MW, but given the
even higher commissioning of 402 MW, the company ended the quarter with a reduced order backlog of 1,104 MW
(down from 1,146 MW in Dec15). Management is confident of booking strong orders in FY17 on the robust
order pipeline.
Incentives on inter-state transmission to drive demand: Recently, the government has exempted renewable power from
inter-state transmission charges & losses. It should enable less-windy states (especially northern states) to meet their
Renewable Purchase Obligation (RPO) and offset plateauing demand from windy states.
Increase earnings and TP, upgrade to BUY: We keep our FY17E EPS unchanged and increase FY18E EPS to Rs 26
(vs. 24 earlier) on expected improvement in realization with higher share of new products (Hybrid tower and 113m dia
rotor). Our revised TP stands at Rs 310 (12x FY18E) vs. Rs 284 earlier.

Financial summary (Consolidated)

Y/E March

Key drivers

FY15

FY16

FY17E

27,027

44,065

53,055

50,033

EBITDA (Rs mn)

4,893

6,732

8,451

8,653

Adj PAT (Rs mn)

3,283

4,348

5,232

5,730

26.3

27.7

14.8

19.6

23.6

25.8

123.7

32.4

20.3

9.5

P/E (x)

16.3

12.3

10.3

9.4

RoE (%)

36.1

26.9

24.9

21.6

EV/E (x)

11.3

9.3

7.1

6.0

DPS (Rs)

Sales (Rs mn)

Con. EPS* (Rs)

EPS (Rs)
Change YOY (%)

Source: *Consensus broker estimates, Company, Axis Capital

FY18E

FY16

FY17E

FY18E

Volumes (MW)

826

940

850

Realization/MW

46.0

48.2

50.2

RM cost/MW

32.9

35.2

36.1

15.7%

16.6%

17.8%

EBITDA margin

Price performance
200

Sensex

Inox Wind

150
100

50
Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

01

09 MAY 2016

Quarterly Update

INOX WIND
ENGINEERING

Exhibit 1: Results update

(Rs. mn)

Mar-16

Net Sales
EBITDA
Other income
PBIDT
Depreciation
Interest
PBT
Tax
Adjusted PAT
Extra ordinary income/ (exp.)
Reported PAT
No. of shares (mn)
EBITDA margin (%)
PBIDT margins (%)
EPS - annualized (Rs.)

18,287
3,140
201
3,341
106
254
2,981
872
2,109
(17)
2,092
222
17.2
18.3
38.0

Quarter ended
Mar-15
% Chg

Dec-15

% Chg

9,414
1,545
150
1,695
86
201
1,409
378
1,030
1,030
222
16.4
18.0
18.6

94.2
103.2
34.3
97.1
23.3
26.7
111.6
130.4
104.7
103.1
76
26
104.7

96.6
84.3
422.9
91.8
88.3
60.6
95.1
149.9
78.9
77.5
(115)
(46)
78.9

9,301
1,704
39
1,742
56
158
1,528
349
1,179
1,179
222
18.3
18.7
21.2

12 months ended
FY17E
FY16
% Chg
53,055
8,451
700
9,151
504
1,577
7,070
1,838
5,232
(3)
5,232
222
15.9
17.2
23.6

44,065
6,732
665
7,397
334
960
6,103
1,755
4,348
(17)
4,332
222
15.3
16.8
19.6

20.4
25.5
5.3
23.7
51.0
64.3
15.8
4.7
20.3
20.8
65
46
20.3

Source: Company, Axis Capital

Exhibit 2: Rising level of working capital is key concern

NWC

NWC days (RHS)

25
20

250

(Rs bn)
176

177

174

178

210

200

15

150

10

100

50

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Source: Company, Axis Capital

Exhibit 3: which should ease in Q1 with higher commissioning as common infrastructure

for 800 MW in place
500

Commissioning (MW)
402

400
300

200
100

158

140
94

78

Mar-15

Jun-15

166

30

Sep-14

Dec-14

Sep-15

Dec-15

Mar-16

Source: Company, Axis Capital

02

Quarterly Update

09 MAY 2016

INOX WIND
ENGINEERING

Madhya Pradesh contributed more than 30% of FY16 all-India new wind power
installations vs. ~5% historically. For IWL, the share of Madhya Pradesh was even
higher at ~2/3rd of its FY16 commissioning. New wind power installations in MP
saw a quantum jump (refer exhibit below) after the state raised the tariff from Rs
4.31/kWh to Rs 5.92/kWh and fresh capacity additions could decline with the
recent tariff cut in the state. IWL management expects to partially offset this tariff
decline with its new product offerings (120m hybrid tower, 113m turbines with hub
height 120m). MP constitutes ~25% of IWLs orderbook and ~15% of its wind sites.

Exhibit 4: Wind installations grew by 50% in FY16 largely led by MP

Tamil Nadu

FY12

FY13

FY14

FY15

FY16

1,083

175

114

181

197

204

202

189

316

240

373

209

Karnataka
Maharashtra

423

289

1,043

Rajasthan

546

614

99

525

688

45

202

336

255

440

Madhya Pradesh

101

10

37

453

1,292

Gujarat

791

208

273

195

386

3,207

1,686

2,090

2,298

3,460

Andhra Pradesh /
Telangana

Total

Quantum jump in FY14

as feed-in tariff peaked

Quantum jump post

increase in tariff from
Rs 4.31/kWh to
Rs 5.92/kWh

Source: MNRE, IWTMA, Axis Capital

Exhibit 5: Recent 19% cut in MP feed-in tariff leads to uncertainty in the state but other states give hope
FY12

FY13

FY14

FY15

FY16

Current
Tariff

% change

Madhya Pradesh All

4.31

4.31

5.92

5.92

5.92

4.78

-19%

Rajasthan

Jaisalmer, Jodhpur & Barmer

4.46

5.18

5.46

5.64

5.74

5.76

0%

Karnataka

All

3.70

3.70

4.50

4.50

4.50

4.50

0%

Gujarat

All

3.56

4.15

4.15

4.15

4.15

4.25-4.30*

2-3%*

Andhra Pradesh All

3.37

3.37

3.37

3.37

4.83

4.84

0%

Maharashtra

Wind Zone 2

4.67

4.93

5.05

5.01

5.02

4.89

-3%

Tamil Nadu

All

3.40

3.51

3.51

3.51

3.51

4.16

19%

State

Zone / District

Source: State Electricity Regulatory Commission, Axis Capital; * Industry expectations as current feed-in tariff is awaited

03

Quarterly Update

09 MAY 2016

INOX WIND
ENGINEERING

Exhibit 6: Bumper growth in IWLs FY16 commissioning led by MP

1,200
1,000

AP

Gujarat

Karnataka

MP

Maharashtra

Rajasthan

Tamilnadu

Telangana

800
600

386

400
160

200
0

constituted ~2/3rd of

1, 004
182

Madhya Pradesh

900

790

279
125

520

commissioning
767
201
261

146

204

180

Gamesa

Suzlon

Inox Wind

Others

Source: IWTMA, Axis Capital

Exhibit 7: Wind equipment suppliers introducing new products with higher yield to offset
tariff decline

Lower cost of
energy

High energy
yielding

20%

18%

WT 93

High Returns

WT 100

WT 113

Source: Inox Wind, Axis Capital

04

09 MAY 2016

Quarterly Update

INOX WIND
ENGINEERING

Exhibit 8: WTG market has consolidated significantly with Top 3 players with >2 MW
products gaining market share
Manufacturer

FY12

FY13

FY14

FY15

FY16

Co's with 2 MW product

56%

48%

49%

63%

78%

Gamesa

10%

6%

19%

29%

29%

Suzlon

36%

24%

19%

20%

26%

Inox

2%

15%

7%

12%

23%

Vestas

8%

3%

4%

2%

0%

Co's with < 2 MW product

44%

52%

51%

37%

22%

Regen Powertech

13%

16%

16%

16%

9%

Wind World

24%

26%

17%

10%

5%

RRB

1%

0%

0%

1%

1%

Others

6%

10%

18%

10%

7%

Source: MNRE, IWTMA, Axis Capital

Exhibit 9: Technology advancement leads to higher addressable market potential

Key states
Andhra Pradesh
Telangana
Gujarat
Karnataka
Madhya Pradesh
Maharashtra
Rajasthan
Tamil Nadu
Total

Estimated potential (MW)

50 m
80 m
5,394
10,609
8,591
920
5,439
5,005
5,374
49,130

14,497
35,071
13,593
2,931
5,961
5,050
14,152
102,788

100 m Current Installed (MW)

44,229
4,244
84,431
55,857
10,484
45,394
18,770
33,800
302,242

1,478
4,028
2,880
2,169
4,647
3,996
7,654
26,900

Source: C-WET, MNRE, Axis Capital

05

Quarterly Update

09 MAY 2016

INOX WIND
ENGINEERING

Financial summary (Consolidated)

Profit & loss (Rs mn)
Y/E March
Net sales
Other operating income
Total operating income
Cost of goods sold
Gross profit

Gross margin (%)

Total operating expenses
EBITDA

Cash flow (Rs mn)

FY15

FY16

FY17E

FY18E

Y/E March

FY15

FY16

FY17E

FY18E

27,027

44,065

53,055

50,033

Profit before tax

4,210

6,103

7,070

7,743

72

76

76

76

(204)

(334)

(504)

(549)

27,099

44,141

53,131

50,109

Chg in working capital

(6,291)

(8,621)

(2,278)

2,435

(20,961)

(33,645)

(40,468)

(37,326)

Cash flow from operations

(2,185)

(2,996)

5,034

9,775

6,138

10,496

12,663

12,783

(730)

(3,931)

(800)

(500)

22.7

23.8

23.9

25.5

(1,245)

(3,765)

(4,212)

(4,131)

4,893

6,732

8,451

8,653

Depreciation & Amortisation

Capital expenditure
Cash flow from investing

(903)

(5,512)

(2,377)

(1,560)

Equity raised/ (repaid)

6,678

Debt raised/ (repaid)

3,939

5,897

(3,000)

(4,000)

EBITDA margin (%)

18.1

15.3

15.9

17.3

Dividend paid

Depreciation

(204)

(334)

(504)

(549)

Cash flow from financing

4,690

6,398

7,947

8,103

(622)

(960)

(1,577)

(1,060)

143

665

700

700

4,210

6,103

7,070

7,743

(927)

(1,755)

(1,838)

(2,013)

EBIT
Net interest
Other income
Profit before tax
Total taxation

Tax rate (%)

Profit after tax
Minorities
Profit/ Loss associate co(s)
Adjusted net profit

Adj. PAT margin (%)

Net non-recurring items
Reported net profit

Net chg in cash

10,018

5,897

(3,000)

(4,000)

6,930

(2,611)

(342)

4,215

FY15

FY16

FY17E

FY18E

Key ratios
Y/E March
OPERATIONAL

22.0

28.8

26.0

26.0

FDEPS (Rs)

14.8

19.6

23.6

25.8

3,283

4,348

5,232

5,730

CEPS (Rs)

15.7

21.0

25.8

28.3

DPS (Rs)

Dividend payout ratio (%)

3,283

4,348

5,232

5,730

12.1

9.9

9.9

11.5

(3)

(17)

3,280

4,332

5,232

5,730

Balance sheet (Rs mn)

GROWTH
Net sales (%)

74.4

63.0

20.4

(5.7)

EBITDA (%)

177.5

37.6

25.5

2.4

Adj net profit (%)

148.2

32.4

20.3

9.5

FDEPS (%)

123.7

32.4

20.3

9.5

RoE (%)

36.1

26.9

24.9

21.6

RoCE (%)

30.3

25.3

25.2

24.3

PERFORMANCE

Y/E March

FY15

FY16

FY17E

FY18E

Paid-up capital

2,219

2,219

2,219

2,219

Reserves & surplus

11,700

16,219

21,451

27,181

EFFICIENCY

Net worth

13,919

18,438

23,670

29,400

Asset turnover (x)

2.2

2.0

1.8

1.7

Borrowing

8,743

14,640

11,640

7,640

Sales/ total assets (x)

1.2

1.1

1.1

1.0

(15)

101

101

101

31,948

47,295

52,179

52,656

Gross fixed assets

2,550

6,972

7,772

8,272

Inventory days

69.7

52.8

53.4

54.3

Less: Depreciation

(522)

(856)

(1,360)

(1,909)

Payable days

143.9

133.0

132.2

131.7

2,028

6,116

6,412

6,363

491

Total debt/ equity (x)

1.0

0.9

0.6

0.3

2,519

6,116

6,412

6,363

Net debt/ equity (x)

0.2

0.6

0.3

(0.1)

Other non-current liabilities

Total liabilities

Net fixed assets

Add: Capital WIP
Total fixed assets
Total Investment
Inventory
Debtors

Working capital/ sales (x)

Receivable days

0.4

0.4

0.4

0.5

193.4

200.0

190.0

185.0

FINANCIAL STABILITY

622

622

622

Current ratio (x)

3.2

2.9

2.7

2.9

4,238

5,416

6,541

6,168

Interest cover (x)

7.5

6.7

5.0

7.6

14,322

24,143

27,617

25,359

Cash & bank

7,096

4,788

4,445

8,660

PE (x)

16.3

12.3

10.3

9.4

Loans & advances

3,436

5,534

5,814

4,798

EV/ EBITDA (x)

11.3

9.3

7.1

6.0

9,301

14,116

16,768

15,515

EV/ Net sales (x)

2.0

1.4

1.1

1.0

20,129

26,441

28,377

30,156

PB (x)

3.9

2.9

2.3

1.8

(5.4)

(12.9)

7.9

17.3

Current liabilities
Net current assets
Other non-current assets
Total assets
Source: Company, Axis Capital

31,949

47,295

52,179

52,656

VALUATION

Dividend yield (%)

Free cash flow yield (%)
Source: Company, Axis Capital

06

09 MAY 2016

Quarterly Update

INOX WIND
ENGINEERING

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the
Regulations).
1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE)
as defined in the Regulations, is engaged in the business of providing Stock broking services, Depository participant services &
distribution of various financial products. ASL is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company
and one of Indias largest private sector bank and has its various subsidiaries engaged in businesses of Asset management, NBFC,
Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of which are available on www.axisbank.com.
2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities
and with the Association of Mutual Funds of India (AMFI) for distribution of financial products and also registered with IRDA as a
corporate agent for insurance business activity.
3. ASL has no material adverse disciplinary history as on the date of publication of this report.
4. I/We, authors (Research team) and the name/s subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect my/our views about the subject issuer(s) or securities. I/We also certify that no part of my/our compensation
was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. I/we or my/our relative or
ASL does not have any financial interest in the subject company. Also I/we or my/our relative or ASL or its Associates may have
beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of
the Research Report. Since associates of ASL are engaged in various financial service businesses, they might have financial interests or
beneficial ownership in various companies including the subject company/companies mentioned in this report. I/we or my/our relative
or ASL or its associate does not have any material conflict of interest. I/we have not served as director / officer, etc. in the subject
company in the last 12-month period.
Research Team
Sr. No

Name

Designation

E-mail

Sunil Shah

Head of Research

sunil.shah@axissecurities.in

PankajBobade

Research Analyst

pankaj.bobade@axissecurities.in

Priyakant Dave

Research Analyst

priyakant.dave@axissecurities.in

Akhand Singh

Research Analyst

akhand.singh@axissecurities.in

BuntyChawla

Research Analyst

bunty.chawla@axissecurities.in

5. ASL has not received any compensation from the subject company in the past twelve months. ASL has not been engaged in market
making activity for the subject company.
6. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report,
ASL or any of its associates may have:
i.
ii.
iii.

Received compensation for investment banking, merchant banking or stock broking services or for any other services from the
subject company of this research report and / or;
Managed or co-managed public offering of the securities from the subject company of this research report and / or;
Received compensation for products or services other than investment banking, merchant banking or stock broking services
from the subject company of this research report;

ASL or any of its associates have not received compensation or other benefits from the subject company of this research report or any
other third-party in connection with this report
Term& Conditions:
This report has been prepared by ASL and is meant for sole use by the recipient and not for circulation. The report and information
contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to
any other person or to the media or reproduced in any form, without prior written consent of ASL. The report is based on the facts,
figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.
The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been
independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or
correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational
purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the
same time. ASL will not treat recipients as customers by virtue of their receiving this report.

07

09 MAY 2016

Quarterly Update

INOX WIND
ENGINEERING

Disclaimer:
Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable
or appropriate to the recipients specific circumstances. The securities and strategies discussed and opinions expressed, if any, in this report
may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial
positions and needs of specific recipient.
This report may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this report should
make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies
referred to in this report (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of
such an investment. Certain transactions, including those involving futures, options and other derivatives as well as non-investment grade
securities involve substantial risk and are not suitable for all investors. ASL, its directors, analysts or employees do not take any
responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of
this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the
NAVs, reduction in the dividend or income, etc. Past performance is not necessarily a guide to future performance. Investors are advise
necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are
not predictions and may be subject to change without notice.

ASL and its affiliated companies, their directors and employees may; (a) from time to time, have long or short position(s) in, and buy or sell
the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities or earn brokerage
or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or
investment banker, lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any
recommendation and other related information and opinions. Each of these entities functions as a separate, distinct and independent of
each other. The recipient should take this into account before interpreting this document.
ASL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a
result, the recipients of this report should be aware that ASL may have a potential conflict of interest that may affect the objectivity of this
report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service
transactions. ASL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in
this report.

Neither this report nor any copy of it may be taken or transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed,
directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. If this report is
inadvertently sent or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of
the sender. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to
law, regulation or which would subject ASL to any registration or licensing requirement within such jurisdiction. The securities described
herein may or may not be eligible for sale in all jurisdictions or to certain category of investors.

The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be
treated as endorsement of the views expressed in the report. The Company reserves the right to make modifications and alternations to this
document as may be required from time to time without any prior notice. The views expressed are those of the analyst(s) and the Company
may or may not subscribe to all the views expressed therein.
Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, Corporate office: Unit No. 2, Phoenix Market City, 15, LBS Road, Near Kamani Junction, Kurla (west), Mumbai400070, Tel No. 18002100808/022-61480808, Regd. off.- Axis House, 8th Floor, Wadia International Centre, PandurangBudhkarMarg,
Worli, Mumbai 400 025. Compliance Officer: AnandShaha, Email: compliance.officer@axisdirect.in, Tel No: 022-42671582.

08