Indian Energy Exchange Rating: Buy- Momentum in volumes continued in December

Electricity volumes on Indian Energy Exchange (IEX) jumped 49% y-o-y to 7BUs in Dec’20, led by: (i) continued growth (up 29% y-o-y) in day-ahead market (DAM) volumes, and (ii) strong volumes for the recently launched RTM. In Q3FY21, electricity volumes grew 61% y-o-y to ~20BU. Based on initial data from POSOCO and power ministry, power demand for the quarter is estimated to have risen 6.5% y-o-y, with a generation of 337BUs. This implies a 5.9% market share for IEX for the quarter (v/s a 4% share in FY20).

While an uptick in merchant prices (as demand improves) and the large base of Q4FY20 needs to be watched, we conservatively revise our FY21e electricity volume/EPS estimates by 10%/8% given its strong performance. Rolling forward to 30x Dec’22e EPS, we maintain our Buy rating with a TP of Rs 255/share.