Indian Energy Exchange Limited Research Report

 

Industry

Market Price

Recommendation

Target

Time Horizon

Energy

160

210

Buy

1 Year

 

Q1 FY 2023 Review

Indian Energy Exchange Limited reported net revenue of ₹9,835.19 Lakhs for the quarter ended June 30, 2022, compared to ₹9,102.96 Lakhs for June 30, 2021. EBIT and Profit After Tax were ₹9,186.24 Lakhs and ₹6,912.86 Lakhs for the quarter ended 30 June 2022, as compared to ₹8,243.46 Lakhs and ₹6,210.45 Lakhs during the corresponding quarter of the previous year.

 

Indian Energy Exchange Limited - Investment Summary

CMP (₹)

160

52 Week H/L

318.6/128.37

Market Cap (crores)

14,678

Face Value (₹)

01

Promoter Holding (%)

0.00

Non-Promoter Holding (%)

100

Total (%)

100.00

Book Value

₹7.83

EPS TTM

₹3.52

 

Indian Energy Exchange Limited - Overview

  • Indian Energy Exchange Limited (IEX) is India’s pioneering and premier power trading platform. The exchange provides an automated platform for the physical delivery of electricity.

  • IEX commands a market share of ~90% in the power exchange market.

  • IEX went into business in 2008 following the enactment of the Electricity Act, 2003, which permitted open access in terms of inter-state transmission, followed by the National Electricity Policy and a conducive framework put in place by CERC.

 

Indian Energy Exchange Limited Overview

 

Beta: 0.88

Alpha: 37.07

Risk Reward Ratio: 1.33

The margin of Safety: 22%

 

Indian Energy Exchange Limited - Quarterly Summary

Quarterly (INR in lakhs)

Jun-22

Mar-22

Dec-21

Sep-21

Jun-21

Revenue from Operations

9,835.19

11,208.35

11,754.22

11,037.98

9,102.96

 

 

 

 

 

 

Other income

1,504.29

1,635.73

1,323.68

1,192.44

1,184.82

Total Income

11,339.48

12,844.08

13,077.90

12,230.42

10,287.78

 

 

 

 

 

 

Total Expenditure

2,153.24

2,129.79

2,313.98

1,972.66

2,044.32

EBIT

9,186

10,714

10,764

10,258

8,243

 

 

 

 

 

 

Exceptional Items

54.23

742.04

 

 

 

PBT before exceptional Items

9,240

11,456

10,764

10,258

8,243

           

Finance cost

54.59

45.97

49.53

47.04

54.95

PBT

9,186

11,410

10,714

10,211

8,189

 

 

 

 

 

 

Tax Expenses

2,273.02

2,569.65

2,640.91

2,471.78

1,978.06

PAT

6,913

8,841

8,073

7,739

6,210

 

Business
  • IEX is India's first and largest energy exchange, providing a nationwide, automated trading platform for physical electricity delivery.

  • The exchange platform enables efficient price discovery and increases the accessibility and transparency of India's power market, while also improving trade execution speed and efficiency.

  • IEX has a robust ecosystem of over 6,800 participants spread across 29 states and 5 union territories, including 55 distribution utilities and 500 conventional generators.

  • It also has a strong customer base of 4400+ commercial and industrial customers from industries such as metal, food processing, textile, cement, ceramic, chemicals, automobiles, information technology industries, institutional, housing, real estate, and commercial entities.

  • Product segments:

  • Day Ahead Market (DAM) - IEX allows its participants to transact electricity in 15-minute blocks a day before delivery. Bids are submitted electronically by buyers and sellers.

  • Term Ahead Market (TAM) range for buying and selling electricity for up to 11 days. It allows participants to buy electricity on the same day through intra-day contracts

  • Renewable Energy Certificate (REC) - The Rec market facilitates environmental attribute transactions. Renewable Energy (RE) generators can choose to obtain RECs in exchange for the green attributes of their generation.

  • Energy Saving certificates (ESCERTS) - ESCerts are tradable certificates issued by the Bureau of Energy Efficiency under the Perform, Achieve, Trade Scheme, a market-based mechanism designed to incentivize energy efficiency in large energy-intensive industries.

    Indian Energy Exchange Limited Revenue Breakdown

  • Out of the total revenue generated, 98.99% has been generated from power exchange whereas 1.01% has been generated from gas exchange in FY 2022, compared to 99.28% and 0.72% in FY 2021.

 

Indian Energy Exchange Limited - Revenue Trend

Topline and Bottomline trend (crores)

Indian Energy Exchange Limited Topline and Bottomline trend

 

Indian Energy Exchange Limited EBIT Margin

 

Indian Energy Exchange Limited Shareholding Pattern

 

Indian Energy Exchange Limited - Ratio Analysis

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Profitability Ratio

 

 

 

 

 

EBITDA Margin

91.34%

95.60%

94.28%

90.93%

96.75%

EBIT Margin

86.88%

91.50%

88.35%

85.73%

92.75%

Net Profit Margin

57.14%

64.96%

68.34%

64.63%

69.88%

 

 

 

 

 

 

Return on Investment

 

 

 

 

 

Return on Asset – ROA

 

26%

26%

25%

22%

Return on Capital Employed – ROCE

 

66.17%

54.61%

52.67%

59.43%

Return on Equity – ROE

 

50.47%

46.35%

43.53%

47.84%

 

 

 

 

 

 

Liquidity Ratio

 

 

 

 

 

Current ratio (x)

1.37

1.27

1.46

1.93

1.54

Quick Ratio

1.37

1.27

1.46

1.93

1.54

 

 

 

 

 

 

Turnover Ratio

 

 

 

 

 

Receivables Turnover

 

33.11

32.70

1.94

38.35

Asset Turnover

 

0.40

0.37

0.38

0.32

 

 

 

 

 

 

 

Indian Energy Exchange Limited - Financial Overview

Indian Energy Exchange Limited - Profit and Loss Statement (₹ in Lakhs)

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Revenue from Operations

23,044.80

25,407.68

25,713.11

31,785.06

43,103.51

Other income

2,562.34

4,008.18

4,026.95

3,838.04

5,336.67

Total Revenue

25,607.14

29,415.86

29,740.06

35,623.10

48,440.18

Employees Benefits Expenses

2,407.69

2,483.19

3,323.14

4,438.10

4,175.63

Other Expenses

2,149.94

2,642.34

2,174.14

2,283.58

2,562.35

EBITDA

21,049.51

24,290.33

24,242.78

28,901.42

41,702.20

           

Depreciation, Amortisation and Impairment

1,027.34

1,042.41

1,524.29

1,651.01

1,722.77

EBIT

20,022.17

23,247.92

22,718.49

27,250.41

39,979.43

           

Finance cost

22.66

73.42

156.56

205.48

197.49

EBT

19,999.51

23,174.50

22,561.93

27,044.93

39,781.94

           

Tax expenses

6,830.99

6,670.83

4,990.14

6,501.81

9,660.40

PAT

13,168.52

16,503.67

17,571.79

20,543.12

30,121.54

EPS

         

Basic

4.46

5.47

5.89

6.88

3.35

Diluted

4.41

5.46

5.89

6.88

3.35

 

 

 

 

 

 

Number of shares

         

Basic

2,952

3,017

2,983

2,984

8987

Diluted

2989

3020

2984

2985

8987

 

Indian Energy Exchange Limited - Cash Flow Statement (₹ in Lakhs)

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Net Profit Before Tax

19,999.51

23,174.50

22,561.93

27,044.93

40,523.98

Net Cash from Operating Activities

18,299.69

19,785.49

17,506.97

37,125.71

86,557.18

Net Cash Used for Investing Activities

-3,342.45

-6,212.03

-252.44

-19,605.25

-44,841.93

Net Cash From (Used For) Financing Activities

-12,626.79

-7,843.69

-16,144.84

-7,712.24

-13,577.25

Net Increase in Cash and Cash Equivalents

-2,853.73

-228.80

-3,795.62

3,318.79

17,812.88

Cash And Cash Equivalents at The Beginning of The Year

8,164.04

5,310.31

5,081.51

1,285.89

4,604.68

Cash And Cash Equivalents at The End of the Year

5,310.31

5,081.51

1,285.89

4,604.68

22,417.56

 

Indian Energy Exchange Limited - Balance Sheet (₹ in Lakhs)
 

2018

2019

2020

2021

2022

ASSETS:-

         

Non Current Assets:

         

Property, Plant & Equipment

722.92

716.42

849.16

1429.67

1203.27

Capital work-in progress

28.77

35

2.55

16.79

 

Right-of-use assets

   

1331.21

1037.07

821.03

Other intangible assets

11176.01

10420.9

9717.91

9680.01

8962.74

Intangible assets under development

24.27

89.9

380.64

647.66

488.11

Financial Assets

         

Investments

7755.55

20221.87

19674.94

11216.19

10608.82

Loans

138

170.88

46.08

   

Other financial assets- bank deposits

   

202.5

321.39

130.52

Deferred tax assets (net)

     

340.26

 

Non-current tax assets (net)

101.74

98.84

21.16

75.7

55.85

Other non-current assets

126.89

63.81

39.19

62.68

24.63

Total Non Current Assets

20074.15

31817.62

32265.34

24827.42

22294.97

           

Current Assets

         

Financial Assets:

         

Investments

19091.16

27243.52

31182.12

60064.81

114202.63

Trade Receivables

21.59

4588.65

18.54

319.55

8737.11

Cash and cash equivalent

5310.31

5081.51

1285.88

4604.67

22417.55

Bank balances other than cash and cash equivalent

6126.07

1680.02

1478.24

5782.1

846.31

Loans

2.94

3.24

208.16

   

Other financial assets- Other recoverable

6700.99

13.12

29.79

207.03

324.72

Other current assets

99.29

128.53

257.7

2710.33

795.95

Total Current Assets

37352.35

38738.59

34460.43

73688.49

147324.27

           

Total Assets

57426.5

70556.21

66725.77

98515.91

169619.24

           

EQUITIES & LIABILITIES

         

Equity

         

Equity share capital

3016

3019.19

2983.24

2985.04

8977.88

Instruments entirely equity in nature

         

Other equity

25356.39

34007.71

35811.92

49626.01

61363.11

 Equity Attributable to the Owners

28372.39

37026.9

38795.16

52611.05

70340.99

           

Non controlling Interest

     

2968.99

 

Total Equity

28372.39

37026.9

38795.16

55580.04

70340.99

           

Liabilities:

         

Non Current Liabilities

         

Financial Liabilities

         

Lease Liabalities

   

1169.62

1000.86

799.54

Other financial liabilities

128.28

171.6

191.57

146.35

94.62

Provisions

262.8

365.23

570.88

749.63

779.42

Deferred tax liabilities (net)

1467.51

2441.28

2442.97

2698.2

2225.11

Other non-current liabilities

14.29

16.9

17.57

115.55

9.34

Total Non Current Liabilities

1872.88

2995.01

4392.61

4710.59

3908.03

           

Current Liabilities

         

Financial Liabilities

         

Lease Liabilities

   

221.34

172.29

201.32

Trade payables

8462.98

13382.63

7657.25

16590.47

63516.6

Other financial liabilities

16559.7

15355.67

13720.38

19058.73

29243.72

Current tax liabilities (net)

522.9

272.63

264.53

422.78

342.42

Provisions

16.95

35.74

8.93

11.2

45.75

Other current liabilities

1618.7

1487.63

1665.57

1969.81

2020.41

Total Current Liabilities

27181.23

30534.3

23538

38225.28

95370.22

           

Total Equity and Liabilities

57426.5

70556.21

66725.77

98515.91

169619.24

 

Industry Overview
  • India is the world's third-largest producer and second-largest consumer of electricity, with 395.07GW installed capacity as of January 2022.

  • Increased industrial activity will drive up energy demand, while a growing population, increased electrification, and per-capita usage will provide additional support.

  • 17 of the 20 fastest-growing cities in the world are in India. As a result, the per capita consumption of electricity in India has doubled since the year 2000 and the momentum is expected to continue till 2025 and beyond.

  • The government earmarked ₹19,500 crore (the US $2.57 billion) in the Union Budget 2022-23 for a PLI scheme to stimulate the manufacturing of high-efficiency solar modules.

  • In terms of demand growth, electricity demand growth slowed down in the financial year 2020 due to the impact of COVID-19 and associated lockdowns. The demand growth however rebounded post the easing of restrictions. YOY growth of electricity consumption is 7.8% for the financial year 2022.

  • India is now a power-sufficient country, with peak demand at 203 GW and installed capacity of 399 GW as of 31 March 2022, with thermal capacity accounting for 59% of total capacity.

  • Electricity consumption is an important indicator of a country's level of development. It is an essential component of a country's overall development and is critical for accelerated economic growth. It is an urgent need of the day to provide dependable and high-quality power in an efficient manner.

  • All regional grids are synchronously connected for a smooth flow of power resulting in “One Nation – One Grid – One Frequency”. At present, the interregional transmission capacity of the National Grid is more than 112 GW which has grown by over 15% CAGR over the past 8 years.

  • The distribution network also needs to be upgraded and augmented on a regular basis, which is being done by the distribution companies. The Central Government is also assisting states in the creation/argumentation of distribution infrastructure through various schemes such as the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and the Integrated Power Development Scheme (IPDS), allowing them to meet the goal of providing uninterrupted power supply to all consumers.

 

Indian Energy Exchange Limited - Technical Analysis

Indian Energy Exchange Limited Technical Analysis

 

  • Stock is trading above EMA 200 and MA 200 indicators, with a strong support level of ₹152 and a resistance level at ₹233.

  • One can accumulate this share at the current price.

 

Recommendation Rationale:
  • For the FY22, Indian Energy Exchange Limited’s revenue increased to ₹43,103.51 Lakhs, compared to the previous year of ₹31,785.06 Lakhs. It also registered a net Profit After Tax of ₹30,121.54 Lakhs compared to the last year at ₹20,543.12 Lakhs.

  • IEX enjoys monopoly status in the industry. There are two energy exchanges in India, IEX and PXIL where electricity is traded and IEX enjoys a market share of more than 95%.

  • The company has generated positive EPS of ₹3.35 and ₹6.88 in the last couple of years.

  • The company has a debt-free balance sheet with cash & investments to the tune of 33,820 Lakhs.

  • On June 27, 2022, IEX successfully launched the much-anticipated Longer Duration Contracts up to 90 days on the

  • Exchange, bolstering its presence in the short-term market.

  • In addition, the company launched Hindustan Power Exchange, which will increase competition and volume in the short to medium term due to promotional offers.

  • The Exchange is now preparing to enter new markets such as Ancillary Markets, Capacity Markets, and Gross Bidding Contracts, and is optimistic about getting started as soon as possible.

 

Valuation
  • The company’s revenue has increased at a CAGR of 35.61% from FY 2019-to 2022.

  • For 2022, the company’s ROE and ROCE were 47.84% and 59.43%.

  • Q1FY2023 results got impacted due to the global crisis amid the war tension and the increase in the inflation level.

  • Based on the company's performance in FY22, we anticipate higher revenue for the current fiscal year (2023) compared to the previous year.

  • We used data from the previous five years (2018-2022) to forecast revenue for fiscal years 2023-2027. Revenue growth of 15% is assumed.

 

Indian Energy Exchange Limited - Estimated Income Statement (₹ in Lakhs):

 

Mar-23

Mar-24

Mar-25

Mar-26

Mar-27

 

2023-E

2024-E

2025-E

2026-E

2027-E

Revenue

55,012.44

62,556.66

71,218.37

81,164.89

92,588.67

Employee Expenses

5,861.61

6,131.56

7,401.64

8,310.44

9,672.84

Other Expenses

3,253.98

3,565.39

4,201.80

4,773.65

5,523.29

EBITDA

45,896.85

52,859.71

59,614.93

68,080.80

77,392.55

Depreciation

4,658.09

4,659.09

4,660.09

4,661.09

4,662.09

EBIT

44,301.20

51,297.59

58,051.07

66,480.58

75,721.23

Financial Cost

218.84

253.40

286.76

328.40

374.05

EBT

44,082.36

51,044.19

57,764.31

66,152.18

75,347.18

Tax expenses

10,704.69

12,395.26

14,027.13

16,063.99

18,296.84

PAT

33,377.67

38,648.94

43,737.18

50,088.20

57,050.34

 

  • We initiate coverage on Indian Energy Exchange Limited with a “BUY” and a 1-year Target Price of 210.

 


Disclaimer: This report is only for the information of our customer Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind.

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DISCLAIMER

This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.

 

 

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