Devansh has consistently expressed that the working capital cycle as per the typical accounting std definition does not give the true picture. He has been consistent with his explanation on the same. He has also been consistent in affirming that the focus is on reducing the actual short term debt ( for which the company is paying interest ) by getting LCs before the turbines are shipped out. No more chasing is what he told!.
I would like to highlight certain points over here:
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Additionally, I will turn bearish ONLY IF the numbers he has confirmed does not realise. i.e, a booking of 700-800MW within the next two quarters is almost finalised!. This will push the numbers to 1000s, on par with the entire last FY with one quarter left ( and, Q4 is the strongest.)
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As of March 2017, government might revert the tax saving accelerated depreciation provisions. Even then the order book is targeted to grow by 20% YoY! this is far more lucrative than other industries. Suzlon gets most of their revenue from the IPP projects, which are more dependent on this tax provision than Inox is ( INOX has a lot more clients in other areas. Check their last presentation, dated Feb 2016).
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The Ambit Capital analyst (not disclosing his name here, But i do know his assumptions are invalid to be fair!) has been the most bearish analyst on INOX wind. He has asked idiotic questions for which the management was certainly defensive on personal note ( I believe that is because of his two previous negative report on INOX). Other brokerages are still +ve on INOX!. Apart from that guy (whom I don’t believe as he has constantly tugged on his assumptions even though management gave fairly detailed reply on his queries), other analysts are still stuck with their analysis, with the added exception from CRISIL which does not have any other explanation other than the working capital cycle issue on the degrade!.
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Exposure of Reliance Opp fund has been steadily increasing in INOX over the last one year!. from 1% to 2%. This is out of the 15% on the public cap!. Sundaram holds another 1%. I’ll be worried if either of them has reduced holdings by the next quarterly statement. I heavily doubt it!. This looks more like some bearish guy is shorting it with optimism on bad news from AMSC!.
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AMSC has given exclusive rights on indian manufacturing of its technology along with the knowhow. If AMSC goes bankrupt (which is the actual premise for this dip, INOX can still manufacture this turbine!, and may even save royalty!). The 3MW WTG in collaboration with INOX is also critical and iNOX will have the technical know how. Thank Bajaj or Hero in automobiles and visualise INOX in that perspective!
Additional Note:
The recent slip is due to the disclosure from AMSC quarterly results ( http://ir.amsc.com/eventdetail.cfm?eventid=166775 ) , which has disclosed that their revenue is heavily dependent on INOX ( which is around 63% of its total revenue). With a 63% revenue from INOX, this makes INOX a very important partner!. think how much INOX will benefit if AMSC strictly partners with them. Apart from Siemens-Gamesa, AMSC has the best technology in WTG technologies!.
AMSC stock has slipped around 30% in the last one week since its result. Guess how much INOX slipped? !
AMSC Price:
INOX Price:
Disclosure: I’m constantly averaging on scrip at every 5% dip. Have 5% exposure in my portfolio YTD.