IEX hits 52-week high as Antique retains 'Buy', says coupling risk fading

Antique Broking believes that coupling risk from the uniform market clearing price mechanism could be fading given the practical difficulties in its implementation

Indian Energy Exchange (IEX) shares gained 3.2 per cent on the BSE and clocked a 52-week high at Rs 218.65 per share on Thursday. The stock climbed after Antique Stock Broking suggested coupling risk will fade in time given the practical difficulties in its implementation.

At around 12:31 PM, shares of IEX were up 3.26 per cent at Rs 218.75 per share on the BSE. In comparison, the BSE Sensex was up 133.34 points at 81,656.5.

Antique Stock Broking has retained a 'Buy' rating on IEX and has raised its target to Rs 262 from the Rs 219 per share target price earlier. The brokerage firm believes that the coupling risk could be reduced in the future, given the practical difficulties in its implementation and no major benefits seen so far.

Coupling is a model where buy bids and sell bids from all power exchanges in the country are aggregated and matched to discover a uniform market clearing price (MCP).

Apart from fading coupling risks, analysts at Antique were also upbeat on IEX's volume growth.

"We have increased our volume assumption, resulting in earnings per share (EPS increasing by 5 per cent/ 6 per cent/ 7 per cent for FY25E/ 26E/ 27E," the report stated.

IEX's double-digit volume increase continued on August 24 and year-to-date (Y-T-D) FY25 was supported by softness in exchange prices with Day-Ahead-Market (DAM) market price at Rs 4.3/kwh, down 37 per cent Y-o-Y. Until August 24, volumes were up over 31 per cent year-on-year (Y-o-Y).

Further, Antique reckons, from the mid- to long-term, an uptick in renewable power from 44 per cent share in FY24 to 60 per cent by FY30 offers a continuous opportunity for volume uptick for power exchanges in India.

"Net cash balance sheet, Operating Cash Flow (OCF) yield of over 4 per cent and return on equity (RoE) of 37 per cent, and optionality in business are IEX's key strengths," the report stated.

In the past one year, the shares of IEX have gained 59.7 per cent, compared to the BSE Sensex's rise of 21.2 per cent during the same period.