Neutral Indian Energy Exchange; target of Rs 209: Motilal Oswal

Motilal Oswal's research report on Indian Energy Exchange

Indian Energy Exchange (IEX) reported standalone revenue for 4QFY25 at INR1.4b (+16.5% YoY), below our estimate by 7%, due to a lower-thanestimated per-unit transaction fee (-8.6% YoY, -6.8% QoQ). The reported standalone PAT was in line with our est. at INR1.12b (+17.8% YoY), led by an 18% YoY rise in electricity volumes and other income.  IEX’s overall volumes rose ~27% YoY in 4QFY25, with electricity volumes increasing 18% YoY and renewable (RE) volumes surging 107.5% YoY. IEX holds a dominant market position, with a combined market share of 84% in FY25. Pending approvals for an 11-month contract and the Green RTM market are expected to enhance volume growth opportunities. Volumes in the DAM segment moderated to 44% of total volumes in FY25 from 53% in FY23. Further, new categories such as G-DAM were 6% of total volumes compared to 4% in FY23. Strong volume growth in RECs led to a rise in its contribution to 13% of total volumes in FY25 from 6% in FY23, aided by the company’s strategic pricing discounts to drive participation. While concerns around market coupling have subsided somewhat, it remains a risk.

Outlook

The stock is currently trading at 37x FY26E P/E, at a notable premium to its LT average 1-yr fwd P/E of 28x. Given IEX’s expected PAT CAGR of 13% over FY25-FY27, we believe the current valuations are not inexpensive anymore. We reiterate our Neutral rating on the stock with a TP of INR209.

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