Actual Question:
Is now the correct time to buy Inox Wind shares, as
the prices have dropped down to 167 Rs?
Answer:
Dear Friend!
Inox Wind’ shares have tumbled over 19% supposedly on the back
of a 36% slide in Q4 net profits.
However, this is not the real reason to keep away from the
share.
The main problem with this company is the fundamental change in
it’s business model. In the statement announcing the Q4 results the company had
admitted this when it said, “The industry is under-going a significant change
in market dynamics by shifting from the FIT based market to an auction based
market. Under the new scenario, our conventional order book loses its
relevance, …”
Further, in the light of such a competitive environment, Inox
Wind’s parent company Inox Renewable, it seems, has lost interest in the wind
power project setting-up business and is focussing on manufacturing wind
turbine. It has sold it’s entire portfolio of wind farms of 260 MW in March.
Inox Wind appears to have performed quite decently in the past
and its past financial performance parameters appear to be quite decent.
- The EBDITA Margins in the range of 20-22% is good.
- EBT in the range of 17 -19% is attractive I should say.
- PAT margins of 12–16% is something one can’t complain.
So where does the it's malady lie?
The company is facing bleak prospects not because of it’s
performance but because of fundamental changes in the external environment.
In conclusion, despite the steep correction in the price and whatever
maybe the reasons for the company’s future prospects, in the prevailing scenario
of auction based bidding for wind farm development projects resulting in ever
falling tariffs and other reasons discussed above, as per value investing principles, Inox Wind
shares should not be considered for investment.
Thank you,
With Best Regards,Anand
