News

Published: May 17, 2024
Updated: May 17, 2024

IEX Share Price Target: Q4 Results Fall Short, 20% Downside Predicted

Below-Estimate Q4 Results

Indian Energy Exchange Ltd (IEX) reported lower-than-expected results for the fourth quarter, missing on revenue, EBITDA, and profit after tax. The EBITDA margin also declined due to higher other operating expenses. Despite a forecasted 17% volume CAGR for FY24–26E, Nuvama sees limited upside potential for IEX.

Volume Growth and Price Trends

IEX's Q4 volumes grew 15% year-on-year, but spot prices (DAM) fell 18% YoY, with the average price for FY24 at Rs 5.2 per kWh, which is still significantly higher than the pre-Covid average of Rs 3.22 per kWh. The management anticipates a 15–20% YoY volume growth for FY25, driven by an estimated 7.7% increase in electricity demand.

Target Price and Downside Potential:

Nuvama has set a DCF-based target price of Rs 119, indicating a potential downside of 19.62% from the current price of Rs 148.05. The company highlights risks from potential market coupling, which could erode IEX's competitive advantage in price discovery and affect its medium-term volume growth due to increased competition.

Financial Performance:

In Q4, IEX's profit grew 9.5% YoY to Rs 96.70 crore, and sales rose 15.2% YoY to Rs 149.30 crore. The IEX board has announced a final dividend of Rs 1.50 for FY24. However, revenue growth in Q4 and FY24 was in line with volume growth, indicating pressure on margins.

Market Dynamics:

While DAM volumes grew only 4% YoY, other products like RTM and TAM showed strong growth, with RTM up 27% YoY and TAM accounting for 14% of FY24 sales. However, IGX volumes fell 57% YoY, reflecting significant demand and supply variations for gas.

Nuvama maintains a 'REDUCE' rating on IEX with a target price of Rs 119, citing limited upside despite expected volume growth. The company's need to innovate its product offerings and potential market risks underscore the cautious outlook.