Motilal Oswal's research report on Indian Energy Exchange
Indian Energy Exchange (IEX) reported standalone revenue for 3QFY25 at INR1,313m (+14% YoY), surpassing our estimate by 7%. Reported standalone PAT was 16% above our est. at INR1,031m (+28% YoY), primarily due to a 15.9% YoY rise in electricity volumes and other income. IEX’s overall volumes rose ~17% YoY in 3QFY25, with electricity volumes rising 15.9% YoY and renewable (RE) volumes surging 31% YoY. IEX holds a dominant market position, with a combined market share of 85% in 9MFY25. Pending approvals for an 11-month contract and the Green RTM market are expected to enhance volume growth opportunities. We believe FY26 volume growth could fall short of expectations, given the high base in 9MFY25 and the recent deceleration in power demand growth. Clarity on long-dated contracts, a key catalyst, has been pending for some time. While concerns around market coupling have subsided somewhat, it remains a risk. We reiterate our Neutral rating on the stock with a TP of INR193.
Outlook
Our TP of INR193 for IEX is based on the following: We value the business at Dec-26E EPS of 6.0 with a PE multiple of 32x. This compares with the mean one-year forward P/E of 28x. We have not assumed any value for IGX stake in our valuation.
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