Target: ₹231
CMP: ₹209.40
The short-term power market (7 per cent of total generation) is growing at 18 per cent vs. demand growth of 5-6 per cent. This is poised for significant growth driven by burgeoning power demand (>6 per cent during FY24-30E), increasing share of variable RE, and new market instruments like virtual PPAs.
Demand uncertainty due to changing weather and inherent variability of RE is leading RE-rich states to increasingly rely on short-term power purchases. IEX, with 84 per cent market share, has consistently adapted to market dynamics by consistently introducing new products, providing a superior technology platform and expanding its participants’ base.
We expect the trading volume to grow at a CAGR of 13 per cent during FY25-28, which will drive growth in IEX’s revenue and PAT at a CAGR of 16 per cent and 14 per cent respectively. We initiate coverage on IEX with a Buy and a TP of INR 231 based on 35x P/E FY27.
Challenges and Risks: Regulatory challenges (Changes in regulations or new platforms); Market coupling (if implemented, IEX market share may reduce); Trading margin (demand for reductions in trading margin on exchange at least during solar-hours;) and Market Risk: (Variations in market activity or shifts toward long-term contracts can affect its financial performance).