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ICICI Securities Report
Inox India Ltd. has witnessed stable growth over FY18-FY23 with revenue/Ebitda/profit after tax compound annual growth rate of 16%/14%/14% to Rs 9.7 billion/2 billion/1.5 billion. It is a debt-free company with cash and equivalents of Rs 3.2 billion as of FY23.
The company has built a strong product suite across cryogenic storage tanks ranging from ship fuel storage tanks and mini terminals at ports to fuel dispensation solutions, refrigerant cylinders, non-refillable disposable cylinders, cryogenic solutions for space and medical research, and the recently introduced stainless steel kegs.
Inox India along with the existing growth drivers is well poised to capitalise on new growth drivers such as the shift to a cleaner LNG fuel for transportation (ships and heavy duty commercial vehicles) from diesel, increased use of cryogenic gases in the general industrial purposes, entry into stainless steel kegs market, refrigerant cylinders, etc.
We estimate Inox India's revenue to grow at a 23% CAGR over FY23-FY26E to Rs 17.8 billion, Ebitda expanding at a 26% CAGR to Rs 4.05 billion, as Ebitda margins inch up to 22.7% in FY26E (versus 21% in FY23).
Consequently, we envisage PAT growing at a 26% CAGR to Rs 3.0 billion in FY26E. We also see return on equity improving to 31% in FY26E (versus 29% in FY23).
Given the strong moat and healthy profitability metrics, we believe a price/earning multiple of 42 times is fair as compared to the average P/E of 38 times for FY26E of our coverage universe.
We initiate coverage on Inox India with a Buy and a target price of Rs 1,400, valuing the stock at 42 times FY26E earnings per share of Rs 33.4/share.
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