Inox Wind Rallies For Six-Days In Row, Jumps Over 25%; What's Driving This Energy Stock, And Should You Buy?

Indian wind energy service provider, Inox Wind has been trading on a bullish ton for six days in a row. On Wednesday, the stock price pulled back a little but stayed in the green zone after hitting back-to-back new 52-week highs in the past few trading sessions. Brokerage ICICI Securities said that Inox Wind is getting back on track, after facing a slowdown in conjunction with the wind energy industry. Hence, the brokerage has suggested buying on the stock price.

On Wednesday, the stock zoomed by over 2.5% on BSE to hit an intraday high of Rs 407.90 apiece. This is a slight retraction from its 52-week high of Rs 411.75 apiece that was recorded on the previous day.

Currently, its market cap is over Rs 13,050 crore.

Inox Wind has been trading higher since December 6th. Taking into consideration Wednesday's high level, the Inox Wind share is up by over 25%. From its fresh 52-week high, the stock has gained by over 26% in six days.

The upside in Inox Wind shares come after it announced the completion of infusion of ~ Rs 800 crore before taxes and fees into the company by its promoter Inox Wind Energy.

As per the regulatory filing, this strategic action marks another significant milestone in IWL's journey towards financial sustainability and profitability.

On October 31, 2023, IWL's promoter, IWEL, completed the successful fund raise of Rs 800 crore through an equity share sale of IWL on the stock exchanges, facilitated via block deals, witnessing participation of several marquee long-only foreign and domestic investors. The funds received will be utilized to repay IWL's existing debt.

Should You Buy This Energy Stock?

In its latest research note, ICICI Securities said, "Inox Wind is getting back on track, after facing a slowdown in conjunction with the wind energy industry. During this time, INOX saw a substantial spike in debt. The company has been deleveraging and we estimate its net debt to slim to ~INR 4.7bn by the end of FY24. In addition, the industry is looking up and a revival led by a slew of policy actions is in the offing."

ICICI Securities took note that policy discontinuity in the wind sector did put INOX a bit under the weather between FY18 and FY22.

However, it further said, "Wind OEMs are now set to reap the benefits with a string of positive policy changes. Aided by a newly re-laid policy pitch, the company is priming itself by monetising its assets and reducing external debt. Under a grid dominated by renewables, wind has its place owing to complementarity with other RE resources. Consequently, we expect wind capacity addition to rise from 2GW in FY23 to >6.5GW in FY26E. INOX is poised to see its earnings rebound with the execution of 600MW/850MW in FY25E/FY26E."

On the valuation, the brokerage's note said, "We initiate coverage on the stock with a BUY recommendation. Our P/E-based target price is INR 425, valuing the wind business at 25x FY26E EPS, owing to a renewed focus on wind capacity addition and improved order outlook in the near and medium term and adjust it for NCRPS of INR 18.7bn. We also add the value of the company's stake in Inox Green (valued at market cap adjusted for holding company discount of 15%)."

Inox Wind is India's leading wind energy solutions provider servicing IPPs, Utilities, PSUs & Corporate investors. IWL is a part of the $5 billion INOXGFL Group, the group has a legacy of over nine decades and is primarily focused on two business verticals - chemicals and renewable energy.

Disclaimer:

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