Recommendation from Diversified Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.   

Indian Energy Exchange:CHARGED FOR GROWTH

HERE IS WHY
✓ India’s first and the largest energy exchange
✓Strong growth momentum
✓High returns for stakeholders’ capital

Indian Energy Exchange (IEX) is the first and largest energy exchange in India providing a nationwide, automated trading platform for physical delivery of electricity. The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of trade execution. It has the following product offerings: Day-Ahead Market (DAM) for next day delivery, Term-Ahead Market (TAM) for delivery up to 11 days, Real Time Market for delivery within one hour, Green Term-Ahead Market for intraday, daily and weekly, and renewable energy certificates (REC) along with energy saving certifi-cates (ESCERTS).

All these products offer traders various opportunities for strategic trading and investing. The company reported net sales of Rs317.85 crore in FY21 compared to Rs257.13 crore in FY20.That is a reasonable growth of nearly 24 per cent. IEX’s electricity traded volume in FY21 grew by 37 per cent on a YoY basis. The PBIDT stood at Rs289.01 crore in FY21 as against Rs242.43 crore in the previous year. That is a growth of around 20 per cent. Also, the PAT stood at Rs205 crore while it stood at Rs175 crore in FY20. PAT Total Income 110.38 91.03 93.82 85.23 70.92Other Income 11.92 11.85 6.52 10.86 7.79Operating Profit 106.97 86.71 83.97 80.45 63.25Interest 0.47 0.55 0.48 0.52 0.51Net Profit 77.39 62.10 60.86 58.14 44.34Equity 29.86 29.86 29.85 29.85 29.84 Last Five Quarters (Rs/Cr) ( Consolidated) Particulars Sep-21 Jun-21 Mar-21 Dec-20 Sep-20 CMP (Rs) Monthly Stock Market Returns increased by 17 per cent. The net profit margin for the year ended FY21 stood at 64.6 per cent, which is phenomenal.

A strong operational performance with efficient working capital management was witnessed with a growth of nearly 142 per cent in the cash flows from operating activities increasing from Rs306 crore in FY20 to Rs126 crore in FY21. Net sales for the quarter ended September 2021 stood at almost Rs110.38 crore. That’s a growth of 21.26 per cent QoQ basis and a growth of 55.64 per cent YoY basis. The robust performance was driven by substantial increase in electricity consumption as well as the preference by distribution utilities. The EBITDA exclusive of other income was Rs95.04 crore which saw a rise of 27 per cent QoQ and an increase of 71 per cent YoY.

The net profit stood at Rs77.39 crore, again an increase of 24.61 per cent QoQ and a rise of 74.55 per cent YoY. For over a decade the company has never recorded a drop in its annual profitability. The earnings have been rising consecutively year on year. The EPS recorded in fiscal 2011 was at Rs0.69 while in fiscal 2021 it has grown to 8.87. This consistent growth in profitability has led to exceptional returns for its stakeholders such that the ROE stood at 47.37 per cent and the ROCE at 61.6 per cent. The company is almost debt-free. The stock is trading near the PE level of 84.

The company enjoys a near monopoly status. IEX has an overall market share of more than 95 per cent, (RTM – 99.9 per cent, GTAM – 99.9 per cent, DAM+TAM – 92 per cent). Electricity volume has grown with a CAGR of 32 per cent since 2008, increasing from 2,616 units in FY09 to 74,638 in FY21. In FY21, highest yearly volumes have been recorded at 74 BU. IEX is leveraging and steadily investing in technology and deepening the power market through new products such as Real-Time Market (RTM). IEX is expected to launch some new products like Long-Duration Contracts, Cross Border Trade, Green TAM and DAM, and Exchange-Based Ancillary Market. With India’s power consumption expected to grow at 8-9 per cent during FY 2022, its management expects significant growth for the exchange markets. By virtue of all these factors, we recommend our reader-investors to BUY the scrip.