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Indian Energy Exchange Ltd>
  • CMP : 169.1 Chg : -7.05 (-4.0%)
  • Target : 285.0 (33.18%)
  • Target Period : 12-18 Month

29 Apr 2022

Robust performance?

About The Stock

Indian Energy Exchange (IEX) is the premier electricity exchange in India, which facilitates trading of electricity.  IEX commands a market share of ~95% in the power exchange market  The company has a debt free balance sheet with cash & investments to the tune of ~ ₹ 700 crore

Q4FY22

IEX reported robust Q4FY22 results.  Revenue was up 19.5% YoY at ₹ 112.1 crore  EBITDA in Q4FY22 was at ₹ 94.9 crore, up 22.6% YoY with margins at 84.7%  Consequent PAT in Q4FY22 was at ₹ 88.6 crore, up 9.7% QoQ & 45.3% YoY

What should Investors do?

For the past year, IEX has remained richly valued given its clean balance sheet, near monopoly and bright future prospects.  We continue to remain positive and retain our BUY rating on the stock

Target Price Valuation

We value IEX at ₹ 285 i.e. 55x P/E on FY24E EPS

Key Triggers for future price performance

Introduction of longer duration delivery bases contracts in power exchanges  Bhutan commencing trading in DAM, commencing of trade in hydropower contracts in GTAM  Launch of National Open Access Registry and Long duration contracts (up to 365 days) in the first half of CY23

New Stock Ideas

NTPC is India’s largest power generation company with a total installed capacity of 66885 MW at the group level  NTPC has 17% of total installed capacity in India with 23% generation share  BUY with target price of ₹ 190

Q4FY22 Earnings Conference Call highlights

Day Ahead Market traded 16.75 BUs, Real-Time Market traded 5.125 BUs, Green market traded 1.125 BUs, and on the REC front, a total of 2.249 BUs are traded  Impact of third Covid 19 wave is very little, as there are very little restrictions and that can be seen in electricity demand in Q4 FY22 which is higher by 2.8 % YoY. Renewable power is 151 GW and is almost 38% of total installed capacity and is on track to reach 500 GW by 2030  Current electricity shortage and capped spot prices can limit the volumes traded on IEX but it is a temporary phase and things are expected to get better by second quarter. This will have a negative impact on Q1FY23 volumes and thus we have reduced our volumes estimates from 29.5 BUs to 27.1 BUs for Q1FY23  Launched web based platform for easy access, easy bidding and seamless experience, also working on automated bidding system for DAM and Advance data analytics to eliminate human interference  New Product launches- Electricity derivatives will be launched in Q1FY23, that will also improve the liquidity of spot market. On gross bidding front IEX has applied to CERC for regulatory approval and after that acceptance from market players and shareholders will be done this product will be launched 2023. ON MBED government has sent paper to CERC to draft rules but haven’t received any response from their side, so it remains doubtful. National Open Access Registry will also be launched in first half of CY23. Long duration contracts (up to 365 days) is also in pipeline it has a market size of 55-60 BUs. CRC approved of trade in hydropower contracts in GTAM  Delay in launch of LCD as regulatory is working on understanding new product its implication and outcomes, orders are expected to be released this quarter  Apart from Nepal and Bhutan, Bangladesh has also agreed to join IEX platform for sell and purchase of electricity  Company intends to keep dividend payout ratio in range of 50-60% IGX  IGX has a volume of 7 mmbtu in Q4FY22 and 12 mmbtu in FY22 and compared to 2 mmbtu in FY21. Apart from that IGX has reached breakeven in Q4FY22 and posted a net profit of | 1.8 crore. IGX will work on government plan to reach 15% energy utilization by natural gas  IEX currently holds 47% stake in IGX after recent deal between IEX and IOCL and IGX is now an associate company of IEX

Terms & conditions and other disclosures

ANALYST CERTIFICATION

I/We, Chirag Shah, Yash Panwar PGDM, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock

Buy: >15%

Hold: -5%to 15%;

Reduce: -15% to -5%;

Sell: <-15% 

Pankaj Pandey

Head – Research

pankaj.pandey@icicisecurities.com

 

 

ICICI Direct Research Desk,

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1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

 

 

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