Buy Inox Wind; target of Rs 280: CD Equisearch

CD Equisearch's research report on Inox Wind

Q1FY17 saw one of the lowest volumes in last 8 quarters- commissioning and turbine volumes stood at 48 MW and 40 MW respectively. This was a conscious decision on the part of the management to clear the inventory backlog created due to initial higher production of nacelles and hubs. Going ahead the company aims to synchronize prod supply of complete sets of WTGs to improve the working capital cycle.

The stock presently trades at 10.6x FY17e EPS of Rs. 18.98 and 9.4x FY18e EPS of Rs. 21.57. Robust order book and plans to vend only complete products in future points towards efforts to streamline inventories. However, the company’s unchanged receivable position (static at Rs. 2400 crs since the last two quarters) and jittery working capital cycle cannot be blatantly ignored. The impetus provided by the government to this industry provides some consolation. With the management’s plans to overcome operational difficulties by next couple of quarters and exploit the scope of this industry, we re-affirm our previous rating of “buy” with a revised target of Rs. 280 based on 13x FY18e earnings, over a period of 9 -12 months.