Robust Financials and great scope for demand

• INOX CVA specializes in the manufacturing of cryogenic tanks for the storage of various gases, including LNG, Hydrogen, Carbon Dioxide, oxygen, and nitrogen. These tanks play a crucial role to turn gas into liquid by storing it under low temperatures for transportation. Over the past two years, the company has shown impressive financial growth, with revenue and net profit expanding by 27% and 26%, respectively.
• INOX CVA's financial health is further underscored by a high Return on Capital Employed (ROCE) of 36%, indicating efficient use of capital. In H1FY24, the company reported a net profit margin of 18%, making it an appealing prospect for investors. The consistent positive cash flow from operations, despite some volatility, adds to the company's financial stability.
• The global push for cleaner fuel resources, such as LNG and Hydrogen, aligns with INOX CVA's focus. The increasing demand for LNG, particularly in power generation, presents a significant opportunity for the company. LNG is considered a cleaner alternative to traditional fuels, and INOX CVA is well-positioned to meet the growing demand with its tanks.
• It's noteworthy that only 5% of the total revenue comes from the government, indicating the company's success in attracting private customers. Additionally, with the rising power demand in India, the potential for increased demand for LNG could further benefit INOX CVA. Exports made up 62% of the total revenue.

Valuation

• The company is asking for a PE of 39x and a market cap-to-sales of 6x. This might seem like an expensive ask on the face of it but there are no listed peers in India as Adani Gas and Petronet LNG are into supply of these gases and do not manufacture the tanks to store these gases. Considering that the company boasts healthy financials, these valuations seem justified. Hence, we recommend subscribing to this IPO. ​