Indian Energy Exchange fundamental.

  Indian Energy Exchange

Indian Energy Exchange is engaged in a Power Exchange, licenses by the Central Electricity Regulatory Commission (CERC) for spot trading in power / electricity and trading of Renewal Energy Certificate (REC) and Ecerts.

Fundamental

• Market Cap:  5,627 Cr.
• Current Price:  187.85
• 52 weeks High / Low  203.90 / 111.05
• Book Value:  13.02
• Stock P/E: 31.63
• Dividend Yield: 1.33 %
• ROCE: 67.00 %
• ROE: 47.56 %
• Sales Growth (3Yrs): 14.40 %
• Listed on BSE and NSE
• Face Value:  1.00

• PEG Ratio: 2.84
• Promoter holding: 0.00 %
• Pledged percentage: 0.00 %
• Debt:  0.00 Cr.
• Price to Earning: 32.15
• EPS:  5.97
• Net profit:  177.91 Cr.
• Profit growth: 7.80 %
• Profit growth 7Years: %
• Net profit preceding 12months: 168.56 Cr.
• Profit growth 3Years: 15.18 %
• Dividend yield: 1.31 %
• Debt to equity: 0.00
• Sales last year:  254.08 Cr.
• Sales growth: 1.16 %
• Unpledged promoter holding: 0.00 %
• Investments:  513.53 Cr.
• Intrinsic Value:  271.29

Positive:

Company is virtually debt free.

Company has a good return on equity (ROE) track record: 3 Years ROE 44.76%

Company has been maintaining a healthy dividend payout of 54.58%

Negative:

Stock is trading at 14.42 times its book value

The company has delivered a poor growth of 7.87% over past five years.

Debtor days have increased from 22.22 to 65.92 days.

ndian Energy Exchange Ltd (IEX) is India’s first and largest energy exchange providing a nationwide automated platform for the physical delivery of electricity with over 98% market share. IEX enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of the trade execution. IEX has nearly 6,600 participants registered on exchange from 29 States, 5 Union Territories (UTs). The average daily trade on its platform is 6000+ MW.

 

Investment rationale

 

Pioneer in energy exchange with +98% market share: IEX has +98% market share in energy exchange with an average daily volume of +150 million units which went to a high as +300 million units in a single day. IEX today has 6,600 participants registered on exchange from 29 States, 5 Union Territories (UTs). Participants registered to trade electricity include 55 distribution companies, over 400 electricity generators, and over 4,100 open access consumers. As of December 2019, in addition to participants who traded electricity contracts, participants registered to trade RECs included over 1,100 renewable energy generators and over 4,000 industry and corporate customers. These consumers under open access belong to various industries such as metal, food processing, textile, cement, ceramic, chemicals, automobiles, information technology industries, institutional, housing, and real estate and commercial entities.

 

Under penetrated market: India ranked third in terms of electricity production after China and the United States and fifth in terms of power generation. Despite achieving near 100% electrification, per capita consumption at 1200 units per annum is still below the world average. India’s power market is projected to grow to 1,905 billion units by FY22 from 1,372 in FY2019 on the back of industrial expansion, growth in per capita incomes, enhanced rural electricity availability, and GDP growth. The continued thrust by the Government on its flagship schemes in the power sector will also drive sustainable growth for the short-term power market in India. The short-term market is estimated to be around 13% of a total market size which has provided distribution companies with the option to hold a mix of long-term and short-term contracts and optimize costs. Besides, In India, a mere 4.0% of the power generated is traded through exchanges compared to over 30% in countries like the UK, Netherlands, Germany, and France.

 

Limited impact of Covid-19: The Company, in its recent quarterly earnings, has reported a 40% jump sales volume to 13,835 million units (MU). The Covid-19 crisis has seen a 25 percent dip in peak power demand from 165 GW in the pre-lockdown period to 125 GW during a lockdown. The commercial volume constitutes nearly 50% of total electricity consumption and we can see some impact of ongoing lockdown on electricity volume. In the post-COVID-19 scenario, the nation is likely to emphasize on automation, IT solutions, process innovations, customer-centricity across the energy value chain, and thus energy markets will have a unique opportunity to drive the solutions going ahead.

 

The professionally managed company, innovative products: The Company is professionally managed with diversified shareholding where +26% is held by FIIs, followed by 30% (MF and Insurance) and rest public and others as on Sept 2019. The company has innovative products like the Day-ahead market (DAM), Term-ahead market (TAM), Renewable energy certificates (RECs) and Energy-saving certificates (ESCerts) to offer for a diverse set of clients.

 

Strong financials, reasonable valuation: The Company has a debt-free balance sheet with +80% EBITDA margin and +50% return ratios. IEX has registered growth of >2x in sales and >2.5x in net profit over the last six years. In the recent quarter result, IEX has recorded power sales volume of 53,862 MU in FY20, up from 52,189 MU in 2018-19. Net sales and profit clocked 23% and 21% YoY. At the current price, the stock is trading at 29.6x of itsFY20 consolidated earnings

Shareholding pattern in percentages

	Dec 2017	Mar 2018	Jun 2018	Sep 2018	Dec 2018	Mar 2019	Jun 2019	Sep 2019	Dec 2019	Mar 2020
	5.37	30.22	9.91	13.04	37.93	17.61	19.57	26.48	30.53	31.99
	35.02	13.00	34.18	33.67	11.75	34.94	33.68	29.24	29.70	31.27
	59.02	56.22	55.36	52.77	49.84	47.00	46.29	43.84	39.33	36.33
	0.59	0.56	0.56	0.52	0.49	0.45	0.46	0.44	0.44	0.41