Suzlon peer Inox Wind sees rise in order book but execution disappoints. Should you buy stock?

Inox Wind Ltd, which has Suzlon Energy Ltd as peer, fell in Monday's trade as execution disappointed, as suggested by its March quarter results. ICICI Securities still upped its target prices on the stock, citing strong order inflow; and a sharp reduction in external debt that may lower its annual interest cost going ahead. 

On Monday, Inox Wind shares fell 3.07 per cent to hit a low of Rs 596 on BSE. Inox Wind received an order inflow of 2.3GW in FY24. As a result, it’s order book improved to 2.7GW or 9 times book to bill ratio.

"The execution for Q4FY24 and FY24 was tad disappointing at 129MW and 372W (vs our est. of 450MW) in FY24, 4 times YoY. Note that Inox Wind has reduced the external debt by 75 per cent in the fiscal. We estimate execution growth at 750MW and 1,100MW for FY25E and FY26E, respectively based on strong order inflow and industry prospects," ICICI Securities said.

This broking firm has maintained its 'Buy' on Inox Wind with a revised target price of Rs 720 per share from Rs 675, valuing the stock at 30 times FY26 earnings per share.

Inox Wind saw a substantial spike in debt from FY17-FY23. The company has been deleveraging and its net debt had reduced to Rs 6.5bn by end-FY24. In addition, the industry is looking up and a revival led by a slew of policy actions is in the offing along with strong bidding activity for RE projects with wind component of 10-12GW in FY24.

Inox Wind is not currently pursuing offshore wind projects due to the higher cost of energy. The focus remains on onshore wind, given India's substantial potential. Future capex requirements are expected to be around Rs 50-75 crore per annum for new modes and infrastructure.

Arihant Capital Markets that Inox Wind's guidance is backed by a strong order book of 2.7 GW, which provides visibility for the next two and a half years. 

"Inox Wind has transitioned to a new 3 MW wind turbine platform, which is expected to improve profitability. The company aims to maintain Ebitda margins in the range of 14-15 per cent and targets a working capital cycle of 90 days," Arihant Capital Markets said.

Sulzon Energy Q4 preview

For the March quarter, Anand Rathi expects Suzlon Energy to report an adjusted profit of Rs 262.20 crore, up 283 per cent. Sales are seen rising 52.4 per cent YoY to Rs 2,581.70 crore. Ebitda margin is seen at 12.6 per cent against 15.9 per cent in December and 13.7 per cent in the same quarter last year.

Anand Rathi has a target of Rs 49 on Suzlon Energy. With a 32 per cent market share in India’s wind turbines, Suzlon Energy turned net-cash in 9MFY24 for the first time since FY06. It has battled high debt from incessant acquisitions, the 2008 global financial crisis and anaemic domestic markets due to policy changes, which crimped its prospects.