🌟 Commissioning (in MW) & Debt reduction are the 2 Key Levers for Inox Wind Ltd (IWL)
🌟 At Current prices Risk Reward offered by Inox Wind Ltd is significantly better than Suzlon
According to our estimates :
Suzlon trades at ~ 47X on a 2-year Forward Earnings Basis
Sanghvi Trades ~ 26X on a 1-Year Forward Earnings Basis (post the 30% increase in share price since our latest valuation)
Based on the above, we wrote on March 21st, 2024 that Sanghvi Movers offers a more favourable Risk Reward Ratio than Suzlon.
The Market seems to have validated that view
Building on the base, let’s now uncover valuation estimates for INOX Wind.
2 Key points to bear in mind :
The Key Levers are Deliveries (in MW) and Debt Reduction
As discussed in the Suzlon/Sanghvi Note, commentary from Management suggests challenges on the ground in terms of commissioning.
Based on the above, we’ve created a simple financial model as shown below :
At the bottom of the table, we can see that INOX Wind 1 year Forward estimate ranges between 35-52x, however, IWEL offers a much better Risk Reward.
IWEL is currently the promoter of INOX Wind Ltd and holds ~ 38% in IWL and a Reverse merger between IWEL and IWL is underway.
If the reverse merger were to happen at the share exchange ratio of (IWL)158:10 (IWEL) originally suggested, one can essentially buy IWL at ~ 30% cheaper.
Therefore, On the IWEL level, the 1-year forward range is 24-37X
Comparatively, Suzlon Investors would have to consider 2 years of future earnings and still be priced much higher than IWEL.
Essentially, between Suzlon, INOX and Sanghvi
🌟 Suzlon trades at ~ 47X on a 2-year Forward Earnings Basis 🔴
🌟 INOX Wind (through IWEL) ~ 24-37X on 1-year forward range 🟡
🌟 Sanghvi Trades ~ 26 X on a 1-Year Forward Earnings Basis 🟡
Based on our estimates, it’s obvious that Inox (IWEL) and Sanghvi are better placed relatively, however, please note this is NOT a recommendation to buy/sell/hold etc.
Kindly read the full Disclaimer below.
Look forward to hearing your comments.
Rahul
Disclaimer
Nothing you read here should be construed as investment advice. I do not know your circumstance so please treat the above as nothing more than my personal opinion, which is subject to change without prior notice to you. Please do your work and consult your financial advisor. I may own positions in all stocks, sectors and indices discussed and can exit them without notice.
Promoter is pledging quite a number of shares