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  1. Inox Wind shares gain over 11 per cent in today’s trade; 5 key takeaways from earnings call transcript

Inox Wind shares gain over 11 per cent in today’s trade; 5 key takeaways from earnings call transcript

Inox Wind share price surged over 11 per cent in Wednesday's trade as the company released the transcript of its earnings call on Tuesday.

By: | Updated: September 14, 2016 5:44 PM
Inox Wind Limited, Wind Energy, Wind Energy Firm, Initial Public Offer, Stock Market debut Inox Wind share price surged over 11 per cent in Wednesday’s trade as the company released the transcript of its earnings call on Tuesday. (Reuters image for representation only)

Inox Wind share price surged over 11 per cent in Wednesday’s trade as the company released the transcript of its earnings call on Tuesday. At 10.50 am, Inox Wind shares were trading 10.67 per cent up at Rs 196.00 The scrip opened at Rs 178.70 and touched a high and low of Rs 196.95 and Rs 176.45, respectively. Later, the scrip closed 11.91 per cent up at Rs 198.20.

The company posted 80.44 per cent decline in consolidated net profit at Rs 11.82 crore for the quarter ended June 30, 2016 as compared to Rs 60.42 crore in the same quarter last year. Its consolidated net sales slumped by 32.64 per cent year-on-year to Rs 432.35 crore for the quarter under review against Rs 641.84 crore in the same quarter last year. In an earning call, the management said that its guidance in terms of the results for the full year remains intact and there is nothing that should of concern looking at the quarterly results, for the full year it feels these aberrations will correct themselves and our targets in terms of topline as well as the bottomline remain intact.”

Brokerage House Motilal Oswal after the results said that the first quarter results of the company were below estimates led by weak execution as sales fell 32 per cent year-on-year to Rs 440 crore, much below our estimate of Rs 760 crore. It has maintained Neutral rating on the stock with a target price of Rs 220 citing weak execution, stretched balance sheet led by deteriorating working capital cycle plus uncertainty over renewal of GBI post FY17, continued fall in wind tariffs would put downward pressure on execution and margins.

The company had an earnings call on Septemebr 12, 2016 after the first quarter results, transcript of which was released on BSE on Tuesday. Here are the five key takeaways:

1. Post the end of the quarter as of this date, almost the entire inventory backlog has been cleared and the company expects that clearing of this inventory backlog would lead to a significantly improved working capital cycle going forward.

2. The company revenues went down from Rs 643 cr in Q1 FY2016 to about Rs 435 cr in Q1 FY2017. EBITDA including other income went down from about Rs 113 cr to about Rs 66 cr. The management said, “Let us not read too much into these results. This was a conscious decision. The focus was not on growth and profitability as much as it was in correcting the imbalances in the manufacturing and hence as mentioned over the year now that this has been corrected, we should see revenues and profitability in line with our overall guidance for the full year.”

3. On the side of working capital, the management expects over the coming months for this to correct itself and come back to what the original levels of working capital were which is in absolute terms roughly about Rs 1600 crores.

4. In terms of order book, as of June 30, 2016 it is about 1,240 MW. This represents roughly about 12 to 15 months of execution time. The order addition for the quarter was about 184 MW and 1104 MW, which was the opening order book, increased by 184 MW, which were the additions during the quarter. Execution during the quarter was 48 MW, which led to a closing order book of about 1240 MW. Beyond this the company has also closed several significant orders post Q1 and hence our order book as of now is actually even healthier than this.

5. The management said that it continues to strengthen position and increase market share across IPPs, PSUs, utilities, corporates as well as retail customers and we are maintaining the momentum in the tender market. It has bagged the orders from entities such as IOCL, PTC India, and GIPCL. Our diversified and reputed clientele include all the major IPPs including Adani, SembcorpGreen Infra, Atria, Tata Power, CESC, etc., and PSUs like IOCL, NHPC, RITES, GACL, GMDC etc.

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