CMP: Rs. 451.95; Market Cap:
Rs. 10,029.59 Cr; 52 Week High/Low: Rs. 494.40 / Rs. 325.00.
Total Shares: 22,19,18,226 shares;
Promoters : 19,00,00,000 shares –85.62 %; Total Public holding : 3,19,18,226
shares –14.38 %; Book Value: Rs. 21.85; Face
Value: Rs. 10.00; EPS: Rs. 7.21; Dividend: 0.00 %; P/E: 62.68 times; Ind. P/E:
69.22; EV/EBITDA: 51.67.
Total Debt: Rs. 480.40 Cr; Enterprise Value: Rs. 10,509.00 Cr.
INOX WIND LIMITED: Incorporated on April 9, 2009 and is based in
Noida, India. Inox Wind Ltd is a subsidiary of Gujarat
Fluoro chemicals Limited. Inox Wind Limited manufactures and sells wind turbine
generators and components in India. The
company came out with an IPO on March 18 2015 offering 3,19,18,226 equity shares
of Rs. 10 each for Rs. 325 per share raising Rs. 1,037.34 Cr, retail investor
were given a discount of Rs. 15 per share. It got listed on April 9, 2015 at
Rs. 400 making a high of Rs. 427.40 on listing day. The object of offer for
sale was to invest in new equipment at the Una (Himachal Pradesh) unit to
optimise the capacity of the nacelle and hub manufacturing facility, for
expansion and up-gradation of existing manufacturing facilities, for long term
working capital requirements, for investment in their subsidiary Inox Wind Infrastructure Services Ltd for the
purpose of development of power evacuation infrastructure and other
infrastructure developments and for other general corporate purposes. Inox Wind Ltd provides turnkey
solutions for wind farm projects & offers services including wind resource
assessment, site acquisition, infrastructure development, erections and
commissioning, and also long term operations and maintenance of wind power
projects. Company manufacture the components of wind turbine generators
in-house with a view to ensuring high quality, advanced technology and
reliability and maintaining cost competitiveness. Company has facilities
dedicated to manufacturing nacelles, hubs, rotor blade sets and towers. Inox
Wind have a perpetual license from AMSC Austria GmbH (formerly Windtec GmbH), or
AMSC, a leading wind energy technology company based in Austria, to manufacture
2 MW WTGs in India based on AMSC’s proprietary technology. Inox Wind has a fully integrated state-of-the-art
manufacturing plants at Una (Himachal Pradesh) for Hubs and Nacelles and
Rohika, near Ahmedabad (Gujarat) for Blades and Tubular Towers. Inox Wind
manufactures the key components of the Wind Turbine Generator (WTG) to ensure
high quality based on the most advanced technology, reliability of performance,
and cost competitiveness. Inox WTGs are designed for low wind speed sites such
as those in India. Inox Wind is an ISO 9001:2008 certified company. In
addition, IWL’s manufacturing units are awarded with ISO 14001:2004, OHSAS
18001:2007 and ISO 3834-2 (tower manufacturing facility). Inox Wind turbines
are type certified by TUV SUD according to “The Guidelines for the
Certification of Wind Turbines issued by Germanischer Lloyd” and are duly
enlisted in RLMM by C-WET. Inox Wind
manufacturers two different WTG models 2 MW rating: Rotor
diameter of 93 meters with hub height of 80 meters Rotor Diameter of 100 meters
with hub height of 80 to 92 meters. Inox Wind owns a 100 % subsidiary, Inox
Wind Infrastructure Services, which does the project development in respect of
wind power projects, including wind studies, energy assessments, land
acquisition, site infrastructure development, power evacuation, statutory
approvals, erection and commissioning and long term operation and maintenance
of the wind farms. Company
produced and sold 60 turbine generators and in FY 2013; 60 turbine generators
of 2 MW each. INOX WIND Limited is locally compared with Suzlon Energy Ltd, Honda
Siel Power Products Ltd, Triveni Turbine Ltd, TD Power System Ltd, BHEL,
Siemens Ltd, Crompton Greaves Ltd, Thermax Ltd, ABB India Ltd, Alstom India
Ltd, KEC International Ltd, Gamesa Wind Turbines Pvt Ltd, GE India Industrial
Pvt Ltd, Vestas Wind Technology India Private ltd, Sinovel DB India Pvt Ltd and
globally compared with AZZ Inc of USA,
Ametek Inc of USA, Babcock & Wilcox Enterpr of USA, Broadwind Energy Inc of
USA, Enersys of USA, Franklin Electric Co Inc of USA, Areva of France, Alstom
of France, Gamesa Corp Technologica S.A.
of Spain, Vestas Wind Systems A/s of Germany, Schneider Electric S.E.of France,
PNE WIND AG of Germany.
Investment Rationale:
Outlook and Valuation:
Inox Wind Ltd provides turnkey solutions for wind farm
projects & offers services including wind resource
assessment, site acquisition, infrastructure development, erections and
commissioning, and also long term operations and maintenance of wind power
projects. Company manufacture the components of wind turbine generators
in-house with a view to ensuring high quality, advanced technology and
reliability and maintaining cost competitiveness. Company has facilities
dedicated to manufacturing nacelles, hubs, rotor blade sets and towers. Inox
Wind have a perpetual license from AMSC Austria GmbH (formerly Windtec GmbH), or
AMSC, a leading wind energy technology company based in Austria, to manufacture
2 MW WTGs in India based on AMSC’s proprietary technology. In August 2014, Inox Wind and AMSC amended
the agreement to cover all 2 MW WTGs with rotor diameters between 85 meters and
120 meters. In addition, Inox Wind has a non-exclusive license to manufacture 2 MW
WTGs worldwide based on AMSC’s proprietary technology. Globally, over 15 GW of aggregate
production capacity operates on AMSC technology. As per the terms of license from
AMSC, Inox Wind is required to purchase Electronic Control System manufactured by
AMSC or its affiliates. Inox Wind has a non-exclusive perpetual license from WINDnovation
Engineering Solutions GmbH, Germany for the technology on manufacturing Rotor
blade sets. Inox Wind procures gearboxes from DHHI (China) and Wikov Industry a.s.
(Czech Republic), and generators from Emerson Industrial Automation and ABB
India for its gearboxes and generators. In the equipment supply
business, Inox Wind's is among the top-2 players in India; while the size of this
segment is 15 % for the WTG industry, it is targeted to contribute 30 % to Inox Wind’s
revenue in FY16. The major Wind Turbine
Manufactures in India are Chiranjjeevi Wind Energy, Elecon Engineering, Garuda
Vaayu Shakti, Ghodawat Energy, Inox Wind, NEPC India, Pioneer Wincon,PowerWind,
Regen Power Tech, RRB Energy, Siva Windturbine, Southern Wind Farm, SRC Green
Power, SUZLON.
Inox Wind manufactures the key components for WTGs in-house, which ensures cost competitiveness,
cost-effective logistics, and attractive margins. It has split its manufacturing
activities to ensure cost-efficiency. The existing rotor blade and tower
manufacturing facilities are located at Rohika in Gujarat, adjacent to a highway
to facilitate easier handling during transportation to wind sites and sea ports.
This location is also close to states like Rajasthan, Gujarat, Maharashtra and Madhya
Pradesh, where there is good potential for wind energy production. The more
easily transportable nacelles and hubs are manufactured in Himachal Pradesh, which
gives Inox Wind certain tax incentives. Inox Wind has entered into technology tie-ups
with global players to source key components of the WTG equipment. Technology
tie-ups ensure that Inox Wind has access to latest technology and also saves on R&D
cost, which helps to keep its cost structure lean. Inox Wind outsources raw material
and components that it does not manufacture inhouse. It sources a portion of
the towers required for WTGs from Fedders Lloyd Corporation. Inox Wind gets
warranties from component and raw material suppliers against deficient performance
and resultant liabilities, this arrangement eliminates provisioning for this raw
materials procured. The average wind installation size in India has been
increasing with the shift in customer base from individuals (AD market) to IPPs
(GBI market). The average project size has increased from 2 MW in 2009 to 7 MW in
2013. Project size of 50 MW and above is becoming the norm for IPPs in India.
This customer profile shift augurs well for Inox Wind, as its business model is
focused on the IPP segment rather than the accelerated depreciation (AD)
market. It is the preferred partner for 8 of the top-10 IPPs in India. Focus on
IPPs and timely project execution has helped Inox Wind to develop strong relationships
with the IPPs. Encouraged by enabling government policies, several IPPs have
firmed-up strong capacity addition plans. Given Inox Wind’s relationships with the
IPPs, provides Inox Wind with a sweet spot. In India, 80 % of the wind
energy projects are executed on turnkey basis, as wind power developers do not
have in-house capabilities to undertake project development on a large scale.
Inox Wind’s business model, however, is equally focused on turnkey solutions and WTG
supplies. While turnkey solutions contribute 48 % of its order book, WTG
supplies constitute 52 %. Its balanced business model helps Inox Wind to optimally
utilize its organizational resources. Inox Wind provides turnkey solutions together
with its wholly-owned subsidiaries, Inox Wind Infrastructure Services Limited
(IWISL) and Maruti-Shakti India Limited (MSEIL). Its services include wind
resource assessment, site acquisition, infrastructure development, erection and
commissioning, and long-term operation and maintenance of wind power projects. As of March 2015, Inox Wind’s order book
stood at 1,178 MW, comprising 614 MW for the supply and erection of WTGs and
564 MW for the supply of WTGs. The order book includes executed binding contracts
for 825 MW and term sheets or letters of intent for 432 MW. Robust order book and
ready pipeline of project sites provides comfort on the revenue visibility
front. INXW can to deliver 825 MW in FY16 and 950 MW in FY17. Given its
cumulative supplies of 1,044 MW, operation and maintenance (O&M) provides
interesting opportunities. It is expected that the contribution of O&M to
increase meaningfully post the two-year warranty. The equipment supplier retains
O&M on 100 % of the projects and the business has gross margins of 50 % to 55 %.
The typical cost for O&M stands at Rs. 10 lakh per MW per annum. Backed by strong
revenue and earnings growth and robust return ratios with RoE of 28 % and RoCE of
32 % in FY17. At the CMP of Rs. 451.90, the stock is trading at its all-time high P/E of 16.98x FY16E, 14.30x FY17E. The company can post EPS of Rs. 26.60 for FY16E and Rs. 31.60 for FY17E.
KEY FINANCIALS | FY14 | FY15 | FY16E | FY17E |
---|---|---|---|---|
SALES (₹ Crs) | 1,567.00 | 2,710.00 | 4,980.00 | 5,943.00 |
NET PROFIT (₹ Cr) | 132.00 | 296.00 | 590.00 | 701.00 |
EPS (₹) | 6.60 | 13.40 | 26.60 | 31.60 |
PE (x) | 66.50 | 32.90 | 16.50 | 13.90 |
P/BV (x) | 20.20 | 6.90 | 4.80 | 3.60 |
EV/EBITDA (x) | 51.60 | 21.30 | 12.20 | 9.60 |
ROE (%) | 36.60 | 32.60 | 35.00 | 30.00 |
ROCE (%) | 20.80 | 27.60 | 32.00 | 31.50 |
*As the author of this blog I disclose that I do not hold INOX WIND India Ltd in my any of the portfolios.
Reader Friends, grab a fresh hot cup of coffee, turn on your net & browse on to www.bhavikkshah.blogspot.in & take out few minutes to get to know the most interesting world of investment... Till then HAPPY INVESTING, don't forget to Share !!
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Highly informative post Bhavikk! :) Thanks for sharing!
ReplyDeleteThanks bhavikk .
ReplyDeleteBhavikk pls try to give tips on small caps
Didn't know Inox was in wind energy....well its a promising market there but the way Suzlon faced challenges after backward integration, India makes a very challenging market to survive. Nice post there.
ReplyDeleteHii shweta
Deletethank you so so much for visiting and commenting on my post ..m very happy to see ur comments
yeah indian markets are challenging but it also has tremendous potential to tap.. suzlon faced challenges becoz of its unreasonable acquisition of SENVION (earlier known as REpower- which suzlon now have sold off)
As for the business India has the potential to install over 100,000 MW of wind turbines at 80 meters hub height, implying an untapped wind power potential of 78GW and India has explored only 22 % of its wind power potential till now
so lots more to come and with the help of govt in providing depreciation and compulsory procurement of power from these will give good future for independent power producers and in turn good for manufacturer likes suzlon n inox wind
Thanks a ton for commenting and pls pls do visit again
waiting to see more such comments
keep smiling :)
Why are you using different color font for posting. This is not show professional look for your post.
ReplyDeleteVery very informative blog and posts. Congrats...!!!
ReplyDeleteSir...it is low by then ur recommendated price...please suggest at the CMP
ReplyDeleteHello Mkts rules prices movements but value always prevails so at 400-412 is best for INOX WIND
ReplyDelete