Robust power demand charges IEX stock, aids earnings outlook
₹211.25 on the National Stock Exchange on Thursday. Powering the Street’s optimism is significant volume growth of 12,040 million units (mu) in August, including certificates, marking a 36% year-on-year increase. Electricity volumes rose 17.1% year-on-year to 9,914 mu last month, putting IEX on track to surpass its annual volume growth guidance of 17-18%.
IEX operates a power trading platform that matches short-term power demand and supply, ranging from same-day transactions to contracts for up to three months. Power exchanges have become crucial to meeting the economy’s electricity needs as the market shifts away from long-term purchase agreements to shorter-term contracts. Read this | What's behind India's surging hunger for electricity? For context, power traded through exchanges recorded a 17.5% compound annual growth rate (CAGR) between FY19 and FY24, far outpacing the 5.1% growth in consumption during the same period, according to the Central Electricity Regulatory Commission.
The near-term outlook remains robust, supporting IEX’s growth prospects. Elara Securities expects an earnings CAGR of 15.6% for IEX during FY25-27. Ebitda growth was strong, with a 22% year-on-year increase in Q1FY25 and 17% growth for FY24.
The renewable energy certificate (REC) market is another growth driver for IEX. Generators receive RECs for renewable power generation, which are then bought by various market participants. The REC market got a boost in April 2023 when the floor price was removed, enabling market-driven price discovery.
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