Inox Wind shares a ‘Buy’ on value-unlocking initiatives, says Axis Securities
Inox Wind expects higher order execution from FY25 onwards, with a guidance of 800 MW and 1,200 MW for FY25 and FY26, respectively.
- Sep 9, 2024,
- Updated Sep 9, 2024 1:46 PM IST
Axis Securities has maintained its ‘Buy’ rating Inox Wind Ltd, citing unlocking of new revenue streams. Resco Global, Inox Wind’s EPC projects arm, recently approved a Rs 350 crore equity raise from marquee investors. It intends to use the funds for scaling up of business offerings and capitalising on the strong tailwinds in the wind sector. Axis Securities estimated Resco’s valuation at Rs 5,000 crore and suggested 7-8 per cent stake dilution. The brokerage upped its sales estimates for Inox Wind by 4-13 per cent for FY25 and FY26, Ebitda forecasts by 9-17 per cent and profit estimates by 10-22 per cent.
“Subsequently, the substation assets (non-core) housed at Inox Green Energy Ltd’s balance sheet will be demerged out of Inox Green Energy and will be merged into Resco Global thereby aligning synergies for both businesses. Post the regulatory approvals of the demerger of these power evacuation assets (substations), it will lead to the automatic listing of Resco Global,” the broking firm said.
Inox Green Energy Services is an Inox Wind’subsidiary and the only listed wind O&M services player. Resco Global Wind Services, another aubsidiary, provides EPC services for wind projects and develops common infrastructure, including power evacuation infrastructure, for renewable projects.
“Resco will utilise the substation assets to evacuate even solar power now (in addition to wind) leading to higher utilisation of these assets. The latest RE policies of multiple states allow the hybridisation of existing as well as future transmission assets, providing incremental revenues to asset owners including Resco Global,” Axis Securities noted.
Resco is also looking to increase its offerings under EPC and is venturing into crane services.
The Inox Wind management expects that the impact of the hybridisation of the substation assets will augment the PAT of Inox Wind by Rs 75-100 crore per annum and Rs 50-60 crore per annum from the Crane services. Overall, these new revenue streams will effectively increase the total Ebitda for Inox Wind Ltd Rs 150-175 crore and PAT by Rs 140-150 crore from FY26 onwards, Axis Securities said.
“We factor in the benefits from these unlocking initiatives and increase our revenue/Ebitda/PAT for FY26 by 4 per cent/9 per cent/10 per cent and 13 per cent/17 per cent/22 per cent for FY27 on higher execution. We assign a target P/E multiple of 35 times against 30 times previously to our FY26 EPS estimate, given the tailwinds in the wind sector,” Axis Securities said.
After adjusting for the stake in Inox Green Energy Services Ltd and Resco Global, it arrived at a target price of Rs 270 per share against Rs 205 per share earlier.
Inox Wind expects higher order execution from FY25 onwards, with a guidance of 800 MW and 1,200 MW for FY25 and FY26, respectively. Axis Securities increased its FY27 execution estimate of 1,560 MW to 1,750 MW as the tailwinds in the sector provide more visibility, which is still slightly conservative against the company’s target of 2 GW.
Axis Securities has maintained its ‘Buy’ rating Inox Wind Ltd, citing unlocking of new revenue streams. Resco Global, Inox Wind’s EPC projects arm, recently approved a Rs 350 crore equity raise from marquee investors. It intends to use the funds for scaling up of business offerings and capitalising on the strong tailwinds in the wind sector. Axis Securities estimated Resco’s valuation at Rs 5,000 crore and suggested 7-8 per cent stake dilution. The brokerage upped its sales estimates for Inox Wind by 4-13 per cent for FY25 and FY26, Ebitda forecasts by 9-17 per cent and profit estimates by 10-22 per cent.
“Subsequently, the substation assets (non-core) housed at Inox Green Energy Ltd’s balance sheet will be demerged out of Inox Green Energy and will be merged into Resco Global thereby aligning synergies for both businesses. Post the regulatory approvals of the demerger of these power evacuation assets (substations), it will lead to the automatic listing of Resco Global,” the broking firm said.
Inox Green Energy Services is an Inox Wind’subsidiary and the only listed wind O&M services player. Resco Global Wind Services, another aubsidiary, provides EPC services for wind projects and develops common infrastructure, including power evacuation infrastructure, for renewable projects.
“Resco will utilise the substation assets to evacuate even solar power now (in addition to wind) leading to higher utilisation of these assets. The latest RE policies of multiple states allow the hybridisation of existing as well as future transmission assets, providing incremental revenues to asset owners including Resco Global,” Axis Securities noted.
Resco is also looking to increase its offerings under EPC and is venturing into crane services.
The Inox Wind management expects that the impact of the hybridisation of the substation assets will augment the PAT of Inox Wind by Rs 75-100 crore per annum and Rs 50-60 crore per annum from the Crane services. Overall, these new revenue streams will effectively increase the total Ebitda for Inox Wind Ltd Rs 150-175 crore and PAT by Rs 140-150 crore from FY26 onwards, Axis Securities said.
“We factor in the benefits from these unlocking initiatives and increase our revenue/Ebitda/PAT for FY26 by 4 per cent/9 per cent/10 per cent and 13 per cent/17 per cent/22 per cent for FY27 on higher execution. We assign a target P/E multiple of 35 times against 30 times previously to our FY26 EPS estimate, given the tailwinds in the wind sector,” Axis Securities said.
After adjusting for the stake in Inox Green Energy Services Ltd and Resco Global, it arrived at a target price of Rs 270 per share against Rs 205 per share earlier.
Inox Wind expects higher order execution from FY25 onwards, with a guidance of 800 MW and 1,200 MW for FY25 and FY26, respectively. Axis Securities increased its FY27 execution estimate of 1,560 MW to 1,750 MW as the tailwinds in the sector provide more visibility, which is still slightly conservative against the company’s target of 2 GW.