Wind turbines that are part of Wind Project stand at sunset (Photographer: Eddie Seal/Bloomberg)

Inox Wind Downgraded As Policy Headwinds Forces Company To Guide Bleak Outlook In FY18

Shares of Inox Wind Ltd. fell as much as 19.39 percent, the most since its listing in April 2015, after disappointing earnings and a weak outlook for financial year 2017-18 led to brokerages downgrading the stock and reducing their price targets.

Policy changes, resulting in a shift from feed-in-tariff (FIT) to auctioning regime, post which state electricity boards have stopped signing power purchase agreements (PPAs), will result in a bleak demand outlook.

Under the new scenario, the company’s conventional order book loses its relevance, since these orders were under an FIT-based market regime. With auction-based regime gaining favour, state distribution companies (discoms) are getting rates that are aligned to national level rates. And this brings down the pricing power and market dominance of wind turbine manufacturers.

Sales of all key products for Inox Wind, namely nacelles and hubs, blades and towers declined by 71 percent, 51 percent and 34 percent, respectively. As a result, net sales for the company declined by 44 percent in the January-March quarter.

Improvement in earnings before interest, tax, depreciation, and amortisation (EBITDA) margin resulted in a less-than-proportionate profit decline by 39 percent for the fourth quarter.

Batlivala & Karani Securities downgrades Inox Winds to SELL
Batlivala & Karani Securities downgrades Inox Winds to SELL

While there remains hope that the orders will start coming in slowly, most brokerages have cut the earnings estimates and target price of the stock.

B&K securities revised its FY18 earnings estimates lower by 40%, and downgraded the stock to a ‘Sell’, with a target price of Rs 158 per share. IDFC securities, too, revised FY18 earnings estimates lower by 40 percent, with a revised target price of Rs 165 per share.

Ambit Capital reiterated its ‘Sell’ rating, with the target price revised lower to Rs 143 a share. Dealers expect collateral damage to the stock price of Suzlon Energy Ltd. as well, which operates in the same space.